Demand Drivers

Have you ever wondered why sometimes the market is just different?

The rental market is very different from just a year ago. High demand has returned with high net migration, while- sufficient supply is no longer being generated in Auckland to support that new demand.

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Vacancies vs Occupied Rental Homes

Here is a simple little chart comparing Listings (Vacancies) to Active bonds(Occupied rental homes). If 2.5% of rental properties are being listed on Trademe at any one time then I have found from experience of presenting these charts that the market is likely to be in equilibrium. At equilibrium, rents rise at about the same rate as HH Incomes as shown in my last post. Note that there are seasonal variations caused by our annual university calendar.

Nationally Listings/Bonds sat at 2.5% for over 6 years until this year. Since March 2023 Listings/Bonds fell below 2%. This means we are likely to be supply limited and prices are likely to be rising more than HH Incomes. Wellington (Equilibrium 2%) rose into oversupply in early 2022 and construction has yet to pause so oversupply is now apparent and there was no impact in March 2023. Auckland (3%) however was in severe oversupply prior to 2023, but in March 2023 plummeted into undersupply. Waikato or Hamilton(2%), which has appeared to be in undersupply for years, followed the Auckland pattern dropping to just 1.5% in March 2023. No other region shows any specific change over the last 12 months.

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Migration Impact on Rentals

Migration appears to be driving demand as expected, but here is the actual data.

As Migration remains high at around net 20,000 per month, vacancies in Auckland have fallen from severe oversupply in mid 2022 to severe undersupply 12 months later in mid 2023. Note listings are measured and reported by me weekly but migration data takes over a month to be published by Stats dept.

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Listings on Trademe

Seasonal vacancies in Auckland are now 1500 homes below expected at this time of year. Down from a typical 5,000 homes for rent (6,500 last year) to just 3,500 now.

The listings curve for 2023 (Black line) remains very subdued compared to previous years, will the previous seasonal trough occur in October? That depends on Migration.

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Rents

That shortage is putting pressure on prices. Where this time last year rents were falling in Auckland they are now rising quickly - as should be expected with supply equilibrium below 2.5. The following chart shows average weekly Geometric Mean Rents (MBIE data) in Auckland each month over the last 6 years.

Prices fell throughout 2022 and went below the previous year from August 2022 to February 2023 (blue line), but then sharply reversed in March hitting a record in April 2023. Auckland has minor seasonal variation in rents, especially compared to other main centres.