It’s the ultimate housing paradox – an oversupply of housing in Christchurch following a building boom, versus an unprecedented rental squeeze in Wellington caused by a growing number of students, a decline in social housing stock, and the growth of property management companies in the capital city. Read on to find out more in this month’s property article.
Houses are sitting empty
In a city that was once desperately short of houses after thousands were decimated by earthquakes, it seems quite unbelievable that freshly-built terraced houses are sitting empty, and landlords are dropping prices and offering incentives to secure tenants.
How did it come to this? Following the Christchurch earthquakes, there was a rush to build more houses. Once earthquake insurance money had been paid out, claims were settled and damaged properties repaired, we saw an increase in the number as-is, where-is houses being sold or snapped up by landlords. As a result, Christchurch’s housing stock wasn’t as depleted as it was initially thought to be.
Meanwhile new building continued with market forces promoting even more building – the Reserve Bank’s LVR restrictions were exempt to new builds. And, even though everyone who needed a house now has one, building continues with between 20 and 30 new consents being submitted each month.
The problem lies in trying to change the direction of the construction market, which takes time. And while it may be possible to put the brakes on some prospective developments, others are too far gone and must be fulfilled.
The good news is, many of these are long-term projects which will take several years to complete. Over that time, it’s likely the market will experience some fluctuations in demand and price.
Wellington’s rental squeeze
The growing number of students, a decline in social housing, and an increase in the number of property management companies has created a perfect storm in Wellington, leading to an estimated shortage of 3,500 homes. Experts say it’s likely to take years before supply catches up with demand.
But it’s not just Wellington City; Wellington’s outer suburbs are also feeling the pinch, with rental listings on Trade Me dropping by a staggering 84 per cent in Newlands over the past year, 69 per cent in Lyall Bay, and 65 per cent in Johnsonville. Rental listings on Trade Me are racking up hundreds of views in a matter of hours as renters scour the site for options.
Along with a growth in population in the Wellington region, more than 400 more students enrolled at Victoria University this year when compared with 2015 figures, and more tenants are renewing leases tying up properties and further compounding the problem.
Earlier in March, Prime Minister Bill English said that the growing demand for rentals was “a problem of success”, and that Wellington City Council was trying to address it. Labour Housing spokesman, Phil Twyford, has outlined a four-point plan that included rewriting tenancy rules to provide better security for renters, dealing with property speculation, and increasing the supply of properties and public housing stock.
Sound financial advice
Whatever your situation – whether you’re looking to buy your first home or add to your investment portfolio – it pays to obtain sound financial advice. Get in touch with a Mortgage Express adviser to see how we can help you.
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