Monday 24 June 2013

The Christchurch Problem

Want a single picture illustrating the problem with Christchurch's rental market? Thanks to a hard-working boffin at MBIE, here's a nice one. 

I'd wondered whether the reported drop in the number of affordable rentals reported by MBIE was simply due to reduced availability across the board or whether it reflected a rightwards-shift in all rents. And so I asked for the graph below.*
Those renting a property in New Zealand lodge a bond with the Tenancy Tribunal. The graph comes from their data, via MBIE. We see a massive drop in the number of new tenancies at lower weekly rentals and about as many higher-rent tenancies as there were pre-quake.

The graph above shows the absolute drop in lower-rent tenancies. We can also graph things cumulatively to show the change in the proportion of total rents at each rental band.* The rightward shift in bonds paid is rather pronounced. But without data linking addresses to bonds paid, it's pretty hard to distinguish between a few potential stories. The graph cannot tell us whether we simply had destruction of low-end properties and no change in the rest of the market or across-the-board destruction and then shifts in the price of lower-end properties such that the number of tenancies in the $400-500 per week range remained roughly constant. It seems almost certain that both were going on, but we can't really say much without address-bond-linked data.

Also, the bond data only captures new bonds lodged. Some of the decline in new bonds posted could be due to tenants being reluctant to shift where rental availability is thin. Some of the drop in bonds could also reflect a shift of rental properties into the short-term holiday home market. On the other hand, many long-term tenants may have been displaced where either the house needs to be repaired or where the owner wishes to live in the house while the owner's home undergoes repair work. Either way, the new-bonds-posted data gives a reasonable reflection of the going price of current rentals in Christchurch. Or, rentals as of 2012.

In 2010, there were 18,094 bonds posted. In 2012, 14,695. That's a 19% drop despite rather a few homeowners needing to rent a property.

Thanks to MBIE for providing useful data and discussion!

* Some browsers have problems with the embedded Google Docs graphs. SciBlog's WordPress implementation also usually gets cranky about it. So here are static image versions for those needing them.

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