A survey by independent economist Tony Alexander/Crockers of property investors shows 22 per cent are finding it hard to get good tenants. This is a strong turnaround. A year ago, 24 per cent of property investors said it was easy.

Alexander says this probably reflects the impact of rapidly falling migration, perhaps also with property developers placing unsold stock into the rental pool.

“Clearly the return of international tourists and the shifting of some unknown number of properties back to providing short-term tourist accommodation is having little impact.”

Landlords are reacting to the shortage of good tenants by pulling back on raising rents. A record low 63 per cent say they are planning to raise their rents in the next 12 months.

The change from early in the year has been quite sharp, Alexander says.

But because there are more factors driving the housing market and house prices than what’s happening in the rental market, this shift is not leading to newly depressed price expectations.

Landlord worries about prices declining are falling away as evidence of residential real estate market strength becomes more apparent.

Falling rates

The reason for this market improvement, Alexander says, is not any positive change in the labour market, where the situation for employees is getting worse, but falling interest rates.

Worries about interest rates have fallen sharply, something also seen in his monthly survey of real estate agents with NZHL. Only six per cent of agents now say buyers are worried about interest rates, compared with 68 per cent a year ago and 42 per cent at the end of June.

However, 48 per cent of agents say buyers are worried about employment compared with a below average 14 per cent at the start of the year. “This survey shows quite clearly the deterioration in people’s feelings of confidence about the labour market. The other key thing it shows is buyers are returning to the market in good numbers.”

Two months ago, 35 per cent of agents said fewer people were attending open homes. Now, 42 per cent say there are more people sampling the free coffee and smelling the fresh bread.

A net 43 per cent of agents say there are more first home buyers in the market from a net three per cent seeing fewer two months ago. Also, 25 per cent say they are seeing more investors compared with a net 24 per cent seeing fewer at the end of June.

Alexander says the market remains solidly in buyers’ favour, according to 29 per cent of agents. There are good listings, prices on average are not rising yet, and banks are becoming more willing to extend finance.

The number of agents saying buyers are worried about finance has fallen to 54 per cent from a recent peak of 69 per cent at the end of May. “But conditions are still seen as tighter than before the end of 2021 when the credit crunch (not rising interest rates) caused house prices to start falling.”