More ‘for rent’ signs going up, as vendors give up on selling

1. Brain drain again

This week Stats NZ will publish May’s net migration data, and I wouldn’t be surprised if the figure for NZ citizens turns negative after a solid positive post-Covid run. In other words, the data may confirm that we’re now losing Kiwis in net terms – or that the brain drain is in full flow again. There’s commentary now starting to emerge that this is knocking the rental market, because the people leaving for their OE etc. tend to be younger renters. Landlords should be watching closely, especially given reports of more “for rent” signs going up, as vendors give up on selling.

2. Rental pressures fading?

Speak of the devil, Stats NZ will also release the June rental price data this week. The figures for May already hinted at a slowdown (although they can also be volatile), and since then we’ve also had data showing that asking rents have flattened as more listings come up and demand falters (e.g. as Kiwis head overseas). Added to that list is simply the fact that sharp rent rises over the past 12-18 months must be straining tenants’ finances too. It wouldn’t be a surprise at all if the latest Stats NZ figures show more evidence that the recent rental upswing is fading.

3. Reserve Bank back in focus

All eyes will be on the Reserve Bank on Wednesday at 2pm, when they’re expected to respond again to high inflation (and high inflation expectations too) by announcing another 0.5% increase in the Official Cash Rate, taking it to 2.5%. Thereafter, it could rise by another 1% – or 1.5% if the RBNZ’s own indications prove correct – implying further upwards pressure on mortgage rates. However, given recent moves by our main lenders to actually cut some rates (i.e. two year fixed specials), there’s a growing sense that we may not be far away from a broad peak for mortgage rates. Still, that might be cold comfort for those yet to reprice from their low rate of 12-18 months ago.

CoreLogic chief economist Kelvin Davidson: “Sharp rent rises over the past 12-18 months must be straining tenants’ finances.” Photo / Peter Meecham

4. The correction rolls on … but not everywhere

The latest CoreLogic House Price Index – measuring average value across all properties, not just the median for what happens to have sold recently – showed that national values dropped by 0.8% again in June, the third fall of that size in a row. Since the end of March, values are down by a total of 2.3% nationally, about 5% apiece in Auckland and Wellington, but up by more than 3% in Christchurch. This patchiness is a reminder that in any phase of the so-called cycle it’s never one-way traffic for all sub-markets: Wellington, for example, previously had a big boom, so was more prone to a correction, but Christchurch still has affordability on its side.

5. No buyer group has increased their market share

The latest CoreLogic Buyer Classification data was run last week and the results didn’t show any wholesale changes in three months to the end of June. First home buyers and mortgaged multiple property owners (MPOs) held steady at around the 23% mark each, although cash MPOs did gain a little share, while movers slid back a bit. Generally speaking, however, it was steady as she goes for market share – of course, that’s within the context of continued falls in the number of deals (the tally for first three months of the year was down 31% on the first three months of 2021).

- Kelvin Davidson is chief economist at property insights firm CoreLogic

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