Rentals go mental!
It’s a strange and unusual rental market that Wellingtonians find themselves in right now. You could never have guessed this just a few months ago. Back in the middle of last year, rents were on the rise in Wellington. Up to the end of 2021 rents had risen by 5.5% over the October to December period alone. Regular thinking would have it that January through to March 2022 would definitely see this continue, and for the last 20 years of my property management experience, I would have bet on that.
It’s now May 2022 and rents in Wellington have plateaued – in a lot of cases they’ve receded. This despite what the media is reporting about “skyrocketing rents” and “endless queues of people” at rental viewings. This is at odds with my experience lately.
What’s going on?
What’s actually happening is that the real estate market has impacted on the rental market in a very basic and simple way. The first home buyer market seized up, and access to mortgage funds tightened more than they ever have before.
As usual, January and February saw lots of properties coming onto the market that were debatably overpriced, and so didn’t sell. I actually tried to sell one of my own rentals in Wellington at the end of January this year. Nobody came to the open homes, and no offers came out of that. I was forced to re tenant the property and radically change my plans.
Do some research
Check out Trade Me right now and many rental properties advertised have fabulous professional photos, indicating that these properties were for sale. They clearly didn’t attract the hoped for bonanza price being asked, and so owners turned to companies like managemyproperty to rent them out. Most of our new rental business since January has been properties in this situation.
Other forces at work
• COVID – people are staying home, staying put, and not moving
• Lack of immigration – the borders are opening, but slowly
• New finance rules – the Draconian CCCFA rules stomped on people’s ability to raise a mortgage
There are a lot of rentals on Trade Me that have been listed for over five or six weeks or more. This indicates either that tenant demand has dropped (unlikely), or available rentals have jumped up in number. I’m going with the jump in numbers. The amount of available rentals in Wellington has rapidly grown by 50% on a few months ago. Many of them are owners who went to market, failed to sell and now have to rent the property out.
And a new element is the first home buyers from 2020 who instead of going on their big OE because of lockdown, purchased a property with the money they originally saved up for their trip. Many of them have now had two years of capital growth and rents pushing upwards to make renting their house out viable so they can once again jump on a plane and get back to their big OE.
The core thing in all this is, if no-one is booking in to viewings, or making enquiries about a property, then the best strategy is to reduce the advertised rent to catch your fish.
Wellington rents have definitely plateaued, and are now receding in many areas of the city. If you had your rental property appraised more than 6 months ago, it might be a good idea to get a fresh appraisal. You might be surprised….