The number of available rental listings on Trade Me is 31 percent higher than in May last year. Photo: RNZ

Developers who do not want to try to find buyers for properties in a tough market – or who have had no luck – appear to be choosing to rent them out instead.

The rental market has shifted in favour of tenants, with large numbers of properties listed for rent and asking rents softening.

The number of available rental listings on Trade Me is 31 percent higher than in May last year, which was 41 percent higher than the year before.

BNZ chief economist Mike Jones said every part of the country had experienced a double-digit percentage increase in rental listings this year.

Vacancy rates had also increased, particularly in Auckland and Wellington, where just under 4 percent and 5 percent of the rental stock is vacant, respectively.

Jones said they also had some of the largest increases in vacancies in the past two years.

He said there was anecdotal evidence of a new build “townhouse glut” in both areas.

“Just under a quarter of all listings in Canterbury are townhouses. For Christchurch city the share is 28 percent. That compares to 15 percent for Auckland (11 percent for Auckland city) and an 8 percent average across all regions. New builds comprise 25 percent of Auckland listings and 20 percent of those in Canterbury, noticeably higher than elsewhere. This reflects the coming to market of the huge pipeline of construction work of the past five years.”

Jones said compared to the building work that had been consented over the past five years, there seemed to be a “bulge” of townhouses in Auckland and Christchurch coming through to both the for-sale and rental markets.

“They’re coming at a time when demand has clearly softened… it’s hindered the absorption of those properties into the market. Whether it’s high interest rates or budget under pressure, just generally those properties listed, it’s taking some time to absorb them.”

He said demand should pick up as the economy improved but the inventory would have to be worked through.

It could be that some of the properties listed as rental stock could shift back into the for-sale market as conditions improved, he said.

“I would expect some of the rental stock that’s out there at the moment is there because properties couldn’t be sold at the price the vendors would like. As conditions warm up we could see some of that rental stock shift back to the real estate market for sale and that could slow the rate at which the inventory is worked through.”

There are 257 properties listed on Trade Me with the keyword “new build” including a Mangere development offering a $750 grocery voucher.

Corelogic chief property economist Kelvin Davidson said there was an “overhang” of available listings and more new build properties were being rented than would normally be the case.

“You’d assume some kind of reversion to normal over the long-term … whatever ‘normal’ is.”

Steve Goodey, a property investment coach and investor, said he had noticed developers putting properties on Airbnb that they couldn’t sell. He said it was not like a build-to-rent model, where developers intended to rent the properties for the outset. “It’s more of a ‘oh s…, we couldn’t sell it’ thing.”

He said it should not affect the eventual resale. Many people were hoping the market picked up in the meantime and allowed them to sell, he said.

“It’s gotten worse than I expected it to…the dip in values has been longer and deeper than I expected.”

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