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Market Comment - February 2024

The quest for affordable housing in Christchurch is intensifying, marked by a bustling start to the year characterized by heightened demand for standalone homes and properties in desirable school zones. The surge in demand extends to both students and the expanding Airbnb market, as property owners re-enter the rental landscape. Consequently, tenants giving notice face mounting challenges in securing alternative accommodations, particularly those seeking larger residences. The escalating demand for rentals is driven primarily by a scarcity of supply, an influx of newcomers to the city, and a subdued presence of investors in the market.

 

Notably, a substantial number of inquiries originate from individuals contemplating a move from the North Island to the South. Prospective renters navigating the landscape of affordable housing in Christchurch now encounter heightened competition, placing a considerable burden on their search efforts. Looking ahead, there is an anticipation of rent rate increases, although the pace may moderate compared to the double-digit increments witnessed in the past year. A projected stabilisation at 4 to 5 percent is expected, contingent on economic conditions. However, the trajectory could be influenced by sustained immigration, potentially pushing rental pressures beyond the 5% threshold.

 

The removal of landlords' ability to offset interest against income emerges as a significant catalyst for the escalating rental rates witnessed in the past two years. Despite the challenges, all January rental properties were successfully leased after a single viewing, and February appears consistent, albeit with a slight dip in attendance at viewings, likely attributable to the majority having already secured accommodations for the new year.

 

Anticipated changes in housing laws for the year include the restoration of no-cause evictions, modifications to the bright-line test, alterations to notice periods for periodic tenancies, the introduction of pet bonds, zoning reforms, and the potential utilisation of KiwiSaver by individuals under 30 for bond payments.

 

A pivotal proposal involves changes to interest deductibility, with the current deductibility of 50% to be maintained until April 2025. Subsequently, there is a planned increase to 75%, followed by full restoration the following year. If this policy is reinstated and interest rates see a reduction, it is anticipated to facilitate property owners re-entering the market, thereby alleviating supply-demand imbalances.

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