In April, our theme was, “winter is coming” and that was in a pure physical sense and also metaphorically, for the coming months within the market. Well, it’s here folks, perhaps a winter we haven’t seen since pre covid times and certainly not one we’ve experienced post lockdowns.  I mean that in sense of the market and how it is behaving. 

Is Winter Letting Slowing Down Post-Covid Surge?

In pre covid times, June, July and August was a time for us to be able to take a breath as it was the traditionally quieter time of the year for letting, tenant churn and properties coming to the market.  As I’ve touched on before, back in the days of tenancies ending when the fixed term expired, we seldom ended them June through to September for the reason of lack of demand over that period. Also, properties tend to present better in the warmer months, especially if vacant.

Covid came along and completely disrupted that pattern. When lockdowns finished, demand soared with people coming together, some coming apart and generally having made life changing decisions while couped up in lockdown. So, for the last four years, we’ve had that post covid market operating here with there being no credence to what was the traditional market.  Well, this year, that’s tipped on its head and we are back to the winter market of old and things are slow, for want of a better word.

At the end of February, I wrote about the stock levels - being around 631 available properties. Today, I’m looking at 991, so a massive 360 increase in the number of properties on the market for rent today compared to four months ago.  That is not an insignificant amount, as mentioned last month, we have the supply and demand curves coming closer together.  It is still a way off the market flattening up to the 1250 available properties of old, but we are leaning closer to that than we have for the last three or so years.  

Christchurch is definitely in demand, statistics from April this year show that there are 2238 more bonds lodged, or rental properties tenanted, than there was in April of 2023.  The median rent was $489 per week back then, compared to $530 per week this year.

We are Independent & Pride Ourselves on Honesty

If you know us then you’ll know we are all about being 100% open and honest and calling things as we see them because we can. We can do this, because we don’t have developer “relationships” or a real-estate arm that is wanting your listing or wants to move on stock in the latest multi-unit development. 

Properties coming to the market at the moment can expect a lag in tenanting.  This has been running on average at two weeks, it will push out to three or more with the larger properties at the top of the rental pool.  Properties that are part of a multi-unit release will also feel some of that pain as they compete for the same tenants.  Some of those have already seen a race to the bottom as owners and agents undercut each other to secure a tenancy.

Rents will hold for now, as I mentioned at the end of May, they’ll still be adjusted to current market but I feel the lid will be on the large increases we have seen.  I can say now that the large increases that we’ve seen for the last 24 months have passed.  Due to supply and demand, the current market just won’t tolerate above market rents right now.  Everyone is feeling the squeeze of the current economic climate, there was always going to be a point where the market said no more.  Some rents will be flat or not increase for the next 12 months due to them being kept at market levels with their last increase.

If selling, expect less than what would have been achievable three to six months ago and even less going forward.

Is Now a Good Time to Invest in Property With all this Gloom?

I know, I have also shown this chart before BUT now is the time to act, so far, I admit I’ve been a bit gloomy, however there is always an upside and we are coming to it.  The brightline is being rolled back today and with that will come opportunity, opportunity to BUY.  But Hamish, why would I want to buy after all you have said this month?  Well because you have a window of opportunity being presented that you haven’t seen for years!  Property prices are about to, well they have already, flattened and moved backwards for a bit.  Add the brightline roll back to that and the market is about to become very much over supplied or as I like to say full of opportunities.  

I often say “property investment is a marathon not a sprint” and here we are at the long term buy and hold investors dream time.  A time of acquisition I would suggest.  Yields are average 4.5-5% and prices flat, when interest rate relief comes, my money is on November, the market will undoubtedly change. 

This is where things get sticky, imagine three units of the exact same type being for sale at the same time, if the vendors are suitably motivated, the race to the bottom is on and it will present opportunities if that type of property is for you.

Is Christchurch Still an Enviable Place to Live?

Christchurch has been recently crowned New Zealand’s happiest city by the 2024 Happy City Index, an annual assessment conducted by the London-based Institute for Quality of Life. Our fair Garden City emerged as the sole New Zealand city in the Top 37 2024 Happy City Index, earning a “gold” category ranking at 32nd place.  While the top cities are mostly in Europe, three New Zealand cities appear on the list: Christchurch, which ranked 32nd globally, and Wellington and Auckland on 50th and 72nd, respectively.  Us one eyed Cantabs already knew we were the top runner nationally anyway. 

Another subtle shift here has been the good old school zone debate and if you are not from Christchurch, this is a nuance to the market here that drives additional capital gain and rental pressure with some areas.  Five schools here have recently released their decisions for 2025 not to accept any out-of-zone applications.  Some of the bigger ones that have capacity have also reduced their appetite for out-of-zone students.  Cashmere High has reduced its zone and also become very difficult to get into out-of-zone, Christchurch Girls and Boys High Schools are also amongst those that run in the zoning race.  All of these add additional pressure to those areas.

University Housing Demand Surges as Students Flock In

On the theme of students, our university or student letting will commence this month.  The headlines of last year, “Student accommodation at capacity as Christchurch becomes 'the cool place to be' “, is just as relevant today as it was last year.  Every affiliated University of Canterbury “hall is at 100% occupancy” and new applications are being added to a waiting list, we see this as we’ve had first year students applying for “student” flats, this is something that we haven’t experienced in a long time (usually flatting starts in second year). 

Students have become a bit more discerning with their choice of accommodation and how far that is from campus over the last few years.  That has resulted in a number of properties being sold or developed, these are generally not replaced.  So again, we see a different demand and supply squeeze outside of the market as a whole. 

What Market Shifts Should Property Investors Watch?

My takeaways are – there is always an upside to every market watch for subtle shifts like school zones and market pressure within micro-markets to experience capital gain and rental pressure that other areas are not.

Keen to Learn More About Property Investment?

We are also delighted to have had been invited to present at the 2024 New Zealand Property Investors Conference to be held in Christchurch 18-20 October.  There are some great presenters lined up such as Michael Yardney, Kelvin Davidson (Corelogic), David Seymour (Act), Andrew Nicol (OPES) and Hamish our Managing Director.  They are always a very informative event so if you are interested there is plenty of information on the website https://www.propertyconference.org.nz.

As always, we do truly appreciate your business and the team and I are always just a phone call away.  We are always available for a free chat and are happy to share our experience and knowledge wherever we can be helpful.  

Hamish and the Team @A1