Market Comment - September/October 2022
Everyone loves to talk, debate, and speculate on the current and future direction of the rental market, nobody more so than Christchurch people. There have been almost 5000 dwellings consented in the past year in Christchurch, which is great for growth, and we have needed it to support the inflow of people. However, we do need the right type of property and must not fall into thinking that Christchurch needs Auckland solutions to housing problems that Christchurch doesn’t have. The Government Medium Density Residential Standard means someone can build a three-story building (12 metres) one metre from your boundary with no design standards. Sure, we all want development, but it needs to be appropriate to the area. Long term, people will not rent units or properties that have no sun or natural light, and even if they did, it would most certainly affect long-term rental rates. Christchurch has a proud legacy of having a good strong social and environmental conscience and doing what’s right, and long may that continue. This is not to say don’t build taller buildings at all, but do it in the appropriate locations with appropriate infrastructure. The more the development of three levels in the suburbs is allowed, the less in-fill and progress will be happening in the city centre and four avenues where we need the input and density. Interestingly the Christchurch City Council voted this month against the Government directive to introduce the new housing intensification standards. So, let’s see how this plays out as Christchurch is the only city that has pushed back.
How’s our local market? After being a bit patchy at the start of the month we have seen rents holding over the last couple of weeks, mainly for standalone homes. The Trade Me Rental Price index showed that median rent in Canterbury reached $500 for the first time ever. Again, every location continues to see new builds and in-fill with a higher number of units available for rental. Rents for newly built 2-bedroom units range from $470 per week to $540, so, will this cause rents to stabilise? Yes, I believe it has already, with the amount of similar property coming to the market. We are also seeing fixed selling prices for the first time in several years and options for guaranteed rental deals on new-build purchases. The higher cost of living could be keeping younger people out of purchasing and they may be deciding to remain at home for a bit longer yet or continue to rent. Saving for the deposit to purchase a property will be a long-term issue and has become a big hurdle for first-time buyers. Will this influence the rental market? Yes, of course, if first-time buyers stay out of the market, they will rent. Good opportunities still exist for owners who buy well.
With the highest inflation in over 30 years, together with increasing mortgage rates, it’s now all about the long-term approach. We are entering a correction of the high peaks of the previous two years with economists having conflicting views on where the market interest rates will go from here. Expectations are for the RBNZ to raise the OCR to 4% by the end of the year, this of course all depends on inflation - interesting times ahead.
This publication has been provided for general information only, and does not constitute financial advice.