Should we expect the worst…?
If we turn the clock back to February 2020, nobody could have guessed how serious Covid-19 would become, or the grasp it would have on both our health and the economy. New Zealand has encountered the full force that a pandemic can create through an unprecedented Level 4 lockdown, and a sudden change to our social and working lives. We have experienced the darker days of 2008 during the Global Financial Crisis, but how does a health pandemic affect our way of life, and what will it mean for the property market in Wellington?
The last six weeks have proven how volatile the property market can be in New Zealand, particularly in Wellington. Why? Significant demand at the beginning of Level 3, followed by days of limited enquiry only weeks after has left property experts feeling uncertain about where the market is heading down the track.
Wellington has always proven to possess an incredibly strong presence in the property market, emphasised by the Capital’s incredibly short stock of homes and the consistently high demand of prospective tenants searching for their new dream home. Renting or selling a property traditionally moves along at a slow pace during the darkest depths of winter but what does the impact of Covid-19 mean for all of this?
Let me take you back to the 21st of May. David Faulkner – Director of RealIQ – came in for his regular Tommy’s visit and we discussed the rental market. I wouldn’t consider this a crisis meeting, but our investigation into the rental properties on the market in Wellington certainly opened our eyes to the current state of affairs that we, and I’m sure others, are experiencing. After a short look on TradeMe, it was noted that there were 740 available properties on the market for rent in Wellington Central and the outer suburbs. This is completely unheard of at this time of the year and I plead that landlords throughout the region adjust their listings to make their properties more attractive and price accordingly to remain competitive. Why the sharp increase of availability you ask? Here are a couple of trends we are seeing that support this finding:
The Airbnb Market
With international travel completely out of the question for the foreseeable future, this shuts out a large audience for Airbnb. Owners are now starting to feel the pinch with less bookings and consequently, minimal return. This desperate response has been emphasised through TradeMe’s data that has noted a significant increase of furnished properties entering the market as long-term rental accommodation in the Wellington region. In April alone, there was a massive 35% increase in the number of searches for fully-furnished properties and Airbnb owners are desperate to capture this market before other landlords do. This has now created serious competition between property investors and property management companies.
Securing tenants is now on their agenda before the market continues to feel the force of financial uncertainty amongst tenants and the more traditionally slower months of winter.
Government Extension of Fixed-Term Tenancies
I am sure we are all well aware of the New Zealand Government’s initiative to prevent any fixed-term tenancy from being terminated until the 26th of June, 2020. This has meant that fewer people are searching for a new rental property which has had a clear impact on demand and will continue to have an impact moving forward. With less people searching for their dream home, more and more properties are sitting on the market and are continuing to wait for any form of interest from prospective tenants.
As we head into mid-July, we should again see a sharp increase in tenant demand. This will last until the end of the month as people intend to secure new leases. The expectation is that this will ideally clear a high percentage of the current stock currently on the marke. It should be a busy couple of weeks for all things property!
I expect that it may be a difficult next few months for the property market in Wellington. But what I would also say, is that the capital will always have a short supply of rental stock, and with the continued growth of the Government working sector, and the increasing numbers at Victoria and Massey University, demand will inevitably come back. The question is – when?
To receive obligation free advice on when is the best time to market your property, or simply to find out if your portfolio could run more smoothly:
Call me today on 021 082 47849.
Jack Sargentina
Business Development Manager
Tommy’s Property Management