Sumner, Christchurch, on February 27, 2011. Photo: Martin Hunter/Getty Images

Christchurch’s rollercoaster rental market

Rent Week 2018: Earthquakes knocked houses down in Christchurch and, unsurprisingly, rents went up. But it’s a different story now in the garden city, finds Jamie Small.

Lots of people left Christchurch after the 2010 and 2011 Canterbury earthquakes, and many who stayed were delivered another kick in the pants in the form of rent hikes.

We’re not talking about the kind of out-of-sight incremental rent hikes that happen on paper but nobody really notices. Many were hit with unaffordable increases at the first rent review opportunity, not to mention those whose homes were seriously damaged and had to find another – probably more expensive and crappier – place to live.

Abigail Neave has lived in four Christchurch flats; five if you count a short-term room rental while she looked for somewhere to live. The first was in 2011, her second year at Canterbury University. The five-bedroom flat wasn’t especially nice, but on a student loan budget it was affordable at $475 per week – $95 a head.

The big one, the February 2011 earthquake, came and went. The lease was due for renewal at the end of the year and the landlords pushed the rent up to $550, an unmanageable hike for the students. They went hunting. “As a student it got much harder after the earthquakes,” said Neave. “There was much less on offer. You don’t want to pay as much as professionals and families and things, and you’re not a preferred tenant.”

Data from Statistics New Zealand shows rental affordability in Canterbury improved between 1998 and 2009, but then started rising from 2010. Bond data collected from tenancy agreements details by how much; median rents rose 14% in Christchurch city after the June 2010 quarter (the first quake struck in September 2010) with rents in the surrounding Selwyn and Waimakariri districts rising 11% and 19% – compared with a national average of 7%.

Screengrab

Rental affordability describes the relationship between rents and wages, the government statistician says. In short, when a region (like Auckland) has high rents and low wages you have an affordability issue. And in Christchurch it was found that “the percentage change in median rents in the greater Christchurch area between 2010 and 2012 was more than double the 5.2 increase in median equivalised weekly household incomes for Canterbury in the same period”. So rents went up by more than double the amount that wages did.

The number of rentals in the private market, as measured by the number of active tenancy bonds held static at 39,000 during 2011 and 2012. But since the earthquakes, the total number of rental bonds lodged with MBIE fell from 20,500 in the year to December 2010 to 16,600 in the year to December 2012 (a 19% decrease), and the number of new bonds lodged in 2012 was the lowest annual number since 1998. Most tellingly, “most of the decrease in available rentals was driven by the loss of two- and three-bedrooms rentals, which traditionally make up the majority of the Christchurch rental market”.

Neave found an unsuitable alternative and lived in it for the next two years. Her bedroom was half of a sunroom the enterprising owners had divided with a bit of gib. Her bed touched three walls, there was a desk at the end of it and just enough room for the door to swing inwards. She kept her clothes in a standalone wardrobe in the family room – and she paid $78 a week for the privilege. “It was bloody freezing. I used to get ice on the inside of the windows. Our shampoo used to freeze and our oil used to separate into two layers.”

In the month of February 2013, the average weekly rent from new bonds lodged for the greater Christchurch region was $384, a 31% increase compared to the pre-earthquake month of August 2010 when the average rent was $293. Greater Christchurch’s average rent increased $92 per week (during this same period, Auckland’s average rent increased $50 per week or 13%).

Photo:n Screengrab

According to CoreLogic bond data, Christchurch has taken a turn: mean rent in the city is decreasing. Real estate commentators have claimed the up-and-down was because of supply and demand. The earthquakes took a lot of houses out of the market, pushing up demand and therefore price for the remainder – at its peak in early 2015, rent was 45% higher than just before the first earthquake. A report from MBIE in 2013 found a whopping 7860 homes were uninhabitable or red zoned post the February 2011 quake, while a further 9100 needed to be rebuilt or had major damage (and were also uninhabitable).

Then as insurance companies paid out and various rebuild programmes progressed, mean rent trended downwards. But rent didn’t decrease as quickly as it increased in those first years, and it can be hard to notice the incremental benefits, especially for those still living in houses with earthquake-related cracks in the walls or uneven floors.

By June last year average weekly rent for tenancies in Christchurch was $360, according to government bond figures down 16% from the city’s high of $431 in early 2015, and at the same level as during as the second half of 2012.

In 2014 Neave followed the big bucks to Auckland and paid big bucks to live there, but she returned to Christchurch at the end of 2015 because she didn’t like Auckland. From what she could see, Christchurch rent had gotten worse in the time she was gone, though she says it was hard to tell because she was no longer a student and had disposable income for something a bit more habitable.

Neave found a flat with some friends, and at the end of 2016 the rent went up $50 a week so they moved again. But that might have been the beginning of the end for rent hikes, she said, because that house stayed empty for a few months after they moved out. She’s been in the same house since then. The lease renewal a few months ago didn’t bring the rent discount the market stats promised – but at least it didn’t go up.


The Spinoff’s business content is brought to you by our friends at Kiwibank. Kiwibank backs small to medium businesses, social enterprises and Kiwis who innovate to make good things happen.

Check out how Kiwibank can help your business take the next step.


The Spinoff’s business section is enabled by our friends at Kiwibank. Kiwibank backs small to medium businesses, social enterprises and Kiwis who innovate to make good things happen.

Check out how Kiwibank can help your business take the next step.

Related:


The Spinoff is made possible by the generous support of the following organisations.
Please help us by supporting them.