COVID-19 lockdown brings the rental market to a halt

PHOTO: Trade Me Property

The Government’s announcement of the COVID-19 Alert Level lockdown brought the New Zealand rental market to a standstill, according to the latest Trade Me Rental Price Index.

Head of Trade Me Property Nigel Jeffries said that the government’s announcement caused some dramatic changes in user behaviour. “Understandably, prospective tenants backed away and demand dropped right off while people hunkered down and stayed at home.

“Now that it’s been announced we’re moving to Level 3, there’s a bit more optimism and we’re seeing tenants come back to Trade Me to check out the homes they may want to snap up when they’re able to move.”

Mr Jeffries said that March 2020 had followed the same upward trend seen in previous months with the national median weekly rent up 3 per cent on March 2019 to $510. “The rental market was looking very robust and landlords were in the driver’s seat with a lot of demand and not enough supply.

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“We’re now waiting to see what impact COVID-19 will have on that picture, it’s really hard to tell and we don’t have a crystal ball, but we’re interested to see what moves both landlords and tenants will make in the near future. Intervention by the government, including the six-month rental freeze, will also have a big impact on the rental market and we’re likely to see some lower rental prices in the coming months.”

Supply steady

Mr Jeffries said the good news is landlords appeared to be playing a waiting game, choosing to see out the lockdown rather than withdraw their current listings. “On a positive note, there are plenty of properties available and lots of options.

“We saw a predictable spike in the number of properties withdrawn during the first week of lockdown but that has slowed down as landlords have clearly decided to see what the post lockdown rental market looks like.”

Demand strong

Looking at demand, Mr Jeffries said it was understandable that tenant activity dropped off in the early stage of the lockdown.

“Prospective tenants withdrew initially from the market, with views on rentals dropping dramatically at the beginning of Alert Level 4. Comparing the first week of lockdown to the week prior, we saw 44 per cent fewer members looking at rental properties. During the second week, the number of members viewing properties increased steadily and then spiked dramatically over the Easter Break. Now we are seeing healthy signs of activity returning to the market.”

The number of members adding rental properties to their watchlist followed a similar pattern. “Watchlist adds dropped off by 54 per cent in the week after the Alert Level 4 announcement, before increasing by 18 per cent in the second week. Reflecting the trends in rental views, watchlist adds also surged over the Easter weekend.”

New listings

Mr Jeffries said there were interesting changes in new listings too, with owners of investment properties that normally service the short term rental market opting to move those properties onto the long term market.

“The number of fully-furnished rental listings onsite doubled in March. This indicates investment property owners may be responding to the pause in tourism by pulling their rentals from the short term accommodation market in favour of the long term market. It will be interesting to see how this trend evolves in the post-COVID-19 market, particularly as the tourism sector looks set for a long road to recovery.”

Now that the Government has announced the details of Level 3, Mr Jeffries expects the rental market to resume activity pretty quickly. “Agents are able to return to work in Level 3 as long as they follow COVID-19 safety guidelines, so we expect to see things pick up pretty quickly. I’m sure lots of Kiwis will be eager to make a move after a month of being stuck in the same spot!”

New Zealand’s rental market before the COVID-19 lockdown

Steady regional growth

March saw growth in double digits for Gisborne, Manawatu/Wanganui, Marlborough, Otago, Southland and West Coast median weekly rent prices. Mr Jeffries said all regions continued to experience healthy growth, with the overall year-on-year growth trending at 3 per cent in March 2020.

Mr Jeffries said the Dunedin rental prices had another strong month, following consistent growth over the past five years. “Dunedin’s median weekly rent price was $450 in March – up 22 per cent on March 2019 when the median weekly rent was $370 per week. Rents in the city have changed dramatically in the last five years with the median weekly rent up a massive 58 per cent since March 2015.”

“Rentals in Dunedin have risen across the board, with all property sizes and types seeing rises in their median weekly rents. Looking at supply, there was a year on year increase of 22 per cent last month when compared to March 2019. Demand dropped off, with the number of enquiries down 36 per cent on February 2020 and down 27 per cent when compared to March 2019.”

Auckland and Wellington

Auckland region rentals had a solid month, with the March median weekly rent sitting at $580, up 2 per cent from the previous month and up 3 per cent on March 2019 when the median rent was $560 per week.

Mr Jeffries said North Shore City, Rodney, Auckland City and Manukau City were the districts with the highest rents. “North Shore City’s median weekly rent was $625, Rodney’s median weekly rent was $585 and Manukau City’s median weekly rent was $570 – all three were up by 5 per cent when compared to the same time last year. Auckland City’s median weekly rent sat at $580, seeing a smaller 2 per cent increase when compared to March 2019.”

The number of enquiries on rental properties dipped across Auckland Region, down 24 per cent on February 2020 and down 10 per cent when compared March 2019. Mr Jeffries said the number of properties available to rent in Auckland was also down 9 per cent on February 2020 and down 10 percent when compared to March 2019. “March’s most popular rental property onsite was a 3 bedroom house in Auckland going for $515, which had 92 enquiries in the first 2 days on site.”

Mr Jeffries said the weekly rent price was $560 in the Wellington region in March 2020, with average rents in the region up 7 per cent since the same month in 2019. “The districts with the highest median weekly rents were Wellington City ($590), Porirua ($565) and Lower Hutt ($550).”

“The number of Wellington properties available for rent was down 16 per cent on February 2020, and up 4 per cent on March 2019. Demand for Wellington rentals slumped, down 40per cent on February 2020, and 20 per cent on March 2019.”

Small house rent reaches new high

The median weekly rent of small, 1-2 bedroom houses reached a record high nationwide, growing 7 per cent to $450. “The Auckland region’s small houses weekly rents were the highest ever, up 6 per cent to $510.”

Urban rentals

Nationwide apartment, townhouse and unit median weekly rent prices were flat when compared to 2019. “In Auckland, median weekly apartment rents reached $530 – a record high, and a four per cent increase when compared to March 2019.