Rents dip unexpectedly

Crockers’ latest market research shows Auckland properties attracted an average weekly rental of $418 for three bedrooms and $322 for two bedrooms in September – the former falling back from several months around the $420 mark.

The medium term trend in sales and rental figures for Auckland against Wellington, Christchurch and Dunedin shows a narrowing of the still-substantial rental gap between Auckland and the other major cities.

However, in recent months, while Wellington has continued to climb closer to Auckland (the Auckland premium is now down to just 20% in the two-bedroom market), rental levels in Christchurch and Dunedin appear to have stabilised, and Auckland retains a steady premium of around 30% and 45%, respectively.

As with rental levels, sales figures for the other three cities show Wellington narrowing the gap, while Dunedin is losing ground on the back of stagnant price levels over the past 18 months.

Despite this, it is clear that the actual return on investment has always been, and still is, higher in Dunedin than in the larger cities, where the past year has seen nominal returns fall below 4.5%.

“No doubt, this is partly offset by higher capital gain. However, the rental equation appears fundamentally more favourable outside the major centers,” says the report.

September’s drop in Auckland residential property prices was accompanied by a fall in sales numbers. For the first time since February 2001 fewer than 2000 sales closed in that month.

Auckland sales have fallen from around 41,000 in the year ended December 2003 to around 33,500 in the year ended September 2007 – a drop of 17%.

A similar drop in the rest of New Zealand has mirrored this – down from 80,000 to 65,000 – a 35% year-on-year drop in the number of sales.

At $441,500, the September median price is back down to March levels, still a year-on-year increase of 11% (compared to an average growth rate of around 14% year-on-year in recent months).