New Zealand’s biggest city has been hit particularly hard over the past 12 months. Although Auckland’s most recent 107-day lockdown has now ended, the city’s rental market has felt its impact. We caught up with Roger Lewis, Principal of Quinovic North Harbour, and Marie Peters, Principal of Quinovic Pukekohe, to discuss their observations on the Auckland rental market this year and the pandemic’s ongoing effects.
The pandemic hit Auckland the hardest in 2021, with the COVID-19 Delta outbreak triggering the longest level 4 lockdown in the country. The result is that many tenants have stayed in their homes for longer, which meant there was very little activity in the city’s rental market during this time. This lack of movement has directly impacted the availability of properties on the market. Marie noted that this standstill provided investors with more tenant stability over this time.
Similarly to the rest of New Zealand, Auckland’s rental market has been impacted by the series of legislative changes introduced this year. Navigating the evolving legislative changes is uncharted territory for many residential property investors.
In Roger and Marie’s experience, the most significant changes in legislation affecting the 2021 rental market have been:
This changed the way rental properties can be managed, introducing specific changes to the termination of tenancy agreements and limitations on rent increases. This has caused many investors to seek the help of professional property management.
Removal of tax deductibility for residential investment property is being phased out with the exception of newly built homes. This makes it particularly challenging for first-time investors with low equity to get started.
Brought in in 2020, this legislation introduced minimum standards for rental properties, aiming to improve the quality of rental homes and maintain them to be warm and dry. Many investors have felt the pinch whilst getting their properties up to the required standard to comply with the regulations. On the 3rd December the Government announced proposed changes to the Heating, Ventilation and Moisture Ingress & Drainage Standards categories of the current Healthy Homes Standards. Although, these changes have not been passed into law and are not scheduled to be in place till April 2022.
Auckland’s housing market has grown at a rapid pace this year, with the average property price now over $1.3 million, directly impacting property investor activity.
Between soaring house prices and the plethora of legislative changes facing residential property investors, behaviour is changing.
Roger explained that the rising house prices are becoming a barrier to purchase for many hopeful investors. The tax-deductibility changes have triggered some investors to sell up and reinvest in different areas. Roger noted that half of his Auckland investors are now turning to new builds, taking advantage of the tax incentive to tackle the housing crisis and invest in newly built properties with deductible interest. This will have a knock-on effect in the market, forecasting less competition for existing housing for first home buyers. This shift towards investment in new builds should see an increase in new builds entering the rental market in 2022.
The North Shore’s rental stock has been consistent throughout the year. Roger noted that at the end of October 2021, there were approximately 686 residential properties on the market, similar to the month prior and this period in 2020.
People are spending more time than ever at home. As a result, there has been a shift in rental demand. Roger noticed a surge in demand for high-quality rental properties around Auckland’s North Shore. However, lockdown restrictions meant property managers could only show properties to one person per day. This has caused property managers to get creative and adapt, relying on videos and photos of properties to find suitable tenants. It’s imperative that the tenant selection process is still thorough, despite restrictions in place.
The demand for rentals in South Auckland has shown strong growth over the past year. In Marie’s experience, she has seen a significant increase in people moving into the district of Franklin. Rent in Franklin has been steadily rising over the past year with overall demand for properties in the area growing, but rental stock in short supply. Marie noted the importance of pricing the rental correctly, stating, “Provided the rental home is priced right, there are plenty of prospective tenants available.” If you are having difficulty pricing your rental correctly, seek the help of an expert. A good property manager will have a specialist understanding of market rent based on location.
New Zealand’s rental and property landscapes are becoming increasingly complex areas to navigate. Here are some of the ways you can try to get the most out of your investment:
Managing an investment property is a great deal of work, and with legislative changes regularly rolling out, it can seem daunting at times. If you have any questions about investing in a property, get in touch with your local Quinovic office. We’re a nationwide team of property management experts and have managed over 100,000 tenancies since 1988. No matter how big or small your question is, we’ll be happy to help. Ask Quinovic today.
