When 27-year-old Ella Prendergast booked her one-way ticket to Italy more than two months ago, the last thing she thought she’d have to worry about was filling her room in her Auckland flat.
The house ticks all the right boxes. It’s in a good location with social flatmates and off-street parking to boot. The house even has a cat.
“It’s a beautiful house, one of those classic villas in the middle of Mount Eden,” she says.
Prendergast is among the 50,000 people the Government expects to head overseas as the borders reopen. She first advertised the room online nine weeks before her departure.
Five weeks have passed. She’s a month away from leaving the country and she’s getting nervous there are still no takers.
“We had one viewing, but the guy who came around was looking at a bunch of flats and ended up going with another one,” she says.
“When people come and look, they’re not just looking at one flat, like they might have in the past when there weren’t as many options.”
Last month, QV general manager David Nagel predicted this gap in the rental market left by young people heading overseas and what an exodus could mean for landlords in the midst of the Reserve Bank increasing the official cash rate to battle rising inflation.
“What will be equally concerning is the much-talked-about ‘brain drain’ to Australia and beyond as our youth search for higher wages and life experience having not had the customary travel opportunities since 2019,” he said.
While these people were generally renters, Nagel said landlords would be watching closely to see what impact this likely exodus has on rents and vacancies, especially with rising ownership costs from mortgage and interest deductibility increases.
This drop in demand is having a flow-on effect on rents. According to TradeMe’s rental price index for June 2022, the national median weekly rent dropped over the previous two months, while supply spiked.
It was only a 1 percent drop month-on-month in June, but this is the first time the national median rent dipped for two consecutive months, according to sales director Gavin Lloyd.
“With the national median rent now sitting at $10 less than its all-time high last seen in April, it’s clear we are no longer in the same market as we were last year, where rents grew relentlessly as supply struggled to keep up with demand,” he said.
One property management company that’s got more vacant properties than usual is Auckland Property Management, which handles more than 2000 properties throughout the region, from Orewa to Bombay.
Usually, the business has a vacancy rate of about 2 percent of these properties. Recently, this has edged up to the “high threes”, according to general manager Celia Burbery.
It’s also taking longer to rent residential properties out. Rentals are currently on the market for an average of 32 days, compared with 25 days just two weeks ago in mid-July.
According to the company’s data for the Auckland region, most of the people who search online for properties managed by Auckland Property Management are on the hunt for homes with a weekly rent between $500 and $700.
“I don’t think it’s an exodus as much as there’s a lack of people coming into the country.”
– Celia Burbery, Auckland Property Management
Younger people also dominate those looking. Of the searches for property, 38 percent were from people aged between 30 and 39, who Burbery suspects are unable to purchase their house. Meanwhile, 24 percent are from Kiwis in the 20 to 29-year-old age bracket.
Burbery believes there’s a range of factors contributing to the slowing market, including people being less inclined to shift house during the pandemic and a reduced number of migrants arriving in New Zealand.
“There is a higher level of stress post-Covid. Life has changed permanently and people are still adjusting to that and are less inclined to move around with more uncertainty in the world,” she says.
“I don’t think it’s an exodus as much as there’s a lack of people coming into the country,” Burbery says.
This lack of demand is hard on landlords, but the property managers do what they can to meet the market.
Burbery says there’s always something that can be done to tip the odds in favour of renting a property out, whether it’s to review rent prices regularly or doing an additional spring clean to make the property more appealing than others on the market.
Landlords can consider offering gift vouchers to successful tenants to sweeten the deal.
“We’re trying to meet the market and the demand. Pricing is ever important, as it’s the demand that sets the price.”
This means rent reductions are not ruled out.
“Sometimes it’s a matter of a rent drop, sometimes it’s a matter of not doing an increase that normally would have taken place.”