Rental growth is running at historically high levels, hitting 6.1% in the year to October, roughly double the long-term average growth rate of 3.2%, CoreLogic NZ’s Monthly Housing Chart Pack shows.
CoreLogic NZ Chief Property Economist Kelvin Davidson said a number of factors are contributing to the surge in rents, including wages growth and an imbalance between supply and demand.
"The recent quiet patch in purchasing activity by investor groups will have dampened rental supply at a time when soaring net migration is placing upwards pressure on demand," Mr Davidson said.
"Our latest Buyer Classification data shows mortgaged investors are responsible for just one in every five purchases, as higher deposit requirements, low rental yields, and lack of mortgage interest deductibility reduce some appeal. It’ll be intriguing to see how they perform in the coming months after a change of government and ‘property friendly’ policies."
Nationally, rental yield edged back up to 3.2% from a trough of 2.6% for much of 2022 and the highest level since late 2020.
Mr Davidson said despite the increase, yields are still relatively low by past standards, and less than the income returns on some other asset classes such as term deposits.
"With rising rents and yields, and some more investor-friendly tax policies on the horizon, we may see investor participation begin to rise, albeit slowly," Mr Davidson said.
Across the main centres, Auckland yields remain the lowest and Wellington is also sub-3%.
"The Reserve Bank has also taken a bit more time recently to ponder debt to income ratios and how they might impact the market. However, even if they're not imposed for another year or so, this property recovery still looks likely slow and patchy, given the challenges of high mortgage rates," he concluded.
November Housing Chart Pack highlights:
- Residential real estate is worth $1.59 trillion.
- National property values saw their first rise in 19 months, showing the downturn is 'officially' over, with the peak to trough decline sitting at 13%. At a regional level, trends remain a little patchy.
- The number of property sales in October rose 13% compared to a year ago, the sixth consecutive monthly increase.
- There were 9,012 new listings over the four weeks ending 12th November, down from 10,753 the same period last year.
- Total stock on the market is 33,944, around 12% below this time last year.
- First home buyers’ market share of 27% remains strong at a record high, with both Auckland and Christchurch at 29% respectively.
- Nationally rental growth hit 6.1% in October, reflecting higher wages, but also a tightening supply and demand balance, as migration soars in NZ.
- Gross rental yields nationally have edged back up to 3.2% (from a trough of 2.6% for much of 2022), the highest level since late 2020.
- Around 54% of NZ’s existing mortgages by value are currently fixed but are due to reprice onto a new (generally higher) mortgage rate over the next 12 months.
- Inflation seems to have passed its peak and the Reserve Bank will wait to see the effects of the 5.5% OCR for this tightening cycle. Mortgage rates are close to, or already at, their peak.
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