South Island rents feel winter chill

Rents fell in almost all regions in May 2020, with the biggest drop for the South Island excluding Canterbury, Stats NZ said today.

Rents for the South Island excluding Canterbury were down 8.6 percent. This is the biggest monthly drop for any region since the series began in November 2006. These percentage changes reflect the new tenancies started in May compared to those started in April (the flow measure).

“This fall is influenced by falling rents in tourism hotspot Queenstown- Lakes District,” consumer prices manager Bryan Downes said.

“The lockdown and border closure to slow the spread of COVID-19 coincided with reports of short-term rental properties aimed at tourists – like AirBnB and BookaBach – being offered as mainstream longer-term rentals.”

Canterbury was the only region to buck the trend, with rents up slightly in May, partly reversing a fall in April.

The widespread regional falls in rents in April coincided with the COVID-19 level 4 lockdown that ran from late March to near the end of April.

“Some tenants may have been reluctant to sign up for a new lease during the lockdown because of the uncertainty for jobs as non-essential businesses closed,” Mr Downes said.

“In May we saw more tenancies beginning as we came out of level four. As people were unable to move and no viewings took place, there were fewer tenancies starting in April.”

Nationally, rents for new tenancies fell 0.6 percent in May, after a 1.8 percent fall in April. There were slight falls in Auckland and Wellington in May after larger falls in April. In the year to May rents fell 0.2 percent for new tenancies.

“This is the first annual fall in rents for new tenancies in more than 10 years – rents since the global financial crisis have in general been increasing,” Mr Downes said.

As well as measuring the flow of rents, Stats NZ measure the stock of rents . The price change for the stock of existing tenancies is more stable than the flow, reflecting leases which may have been signed up months or even years earlier. In May rent prices for the stock of all rentals rose 0.3 percent and is up 3.5 percent on the same month in 2019.

Explanation of stock and flow measures

The flow measure of rents captures rental price change only for dwellings that have a new bond lodged against them in each new month. In contrast, the stock measure of rents shows rental price change across the whole rental population – including renters currently in tenancies.

The stock measure uses the bond lodgment date and the flow uses the tenancy start date. This is one of the reasons behind the lag between the two measures. The lag can be seen in the graph above, especially during the global financial crisis.

For more details of actual rents see MBIE’s tenancy Rental bond data.