Regional Rental Update: Hawke's Bay

Known for its distinctive art deco style and for its extensive wineries, Hawke's Bay is a stunning region of the country that is blessed with a sunny climate, great food and an attractive Mediterranean lifestyle.

Notwithstanding the headwinds of significant labour shortages for growers and a third winter, where our pastoral farmers have not seen anywhere near the desired level of recharge in soil moisture levels.

Hawke's Bay is traditionally dry with long hot summers as well as cool winters. The region plays host to some notable events such as the traditional Art Deco weekend and the Mission Estate Concert. The region is a fruit bowl for the country with apples and cherries complementing the many wineries that you can find across Hawke's Bay.

The two main centers in the region are Napier and Hastings with 166,368 people residing in the region at the time of the 2018 Census. According to Statistics New Zealand and at the time of the 2018 Census, there were a total of 66,312 private residential dwellings with 60,531 of them being occupied. As of June 2020, it is estimated that 65,000 live in Napier whilst 88,000 live in Hastings.

Up until 2016, Hawke's Bay has seen a consistent growth in bonds being lodged. From 1994 through to 2016 there has been an average net increase of 295 bonds per annum and at its peak in September 2016, there were 10,083 active bonds lodged for the region. Since then, there has been a steady decline in active bonds, dropping down to 9,582 as of March 2022. From 2017 to 2022, we have seen bonds drop consistently except for the period when COVID and the lockdown hit. Interestingly, the trend changed temporarily as the borders shut and many holiday homes converted to long-term residential tenancies as revenue streams were impacted by people's inability to travel. 

Hawke's Bay has seen a net loss in rental properties since 2017. 2020 had an increase and this was likely due to the impact of the lockdown as holiday lets converted to long-term residential rentals.

With a reduction in rental stock and with strong demand for rental properties, rents have increased at a much more aggressive rate. Traditionally, rents increase at approximately 5% per annum. In the last two years, rents have increased annually at a rate in excess of 10% since the beginning of the pandemic. Compare this to Auckland where rents have increased by only 3.2%. Increased demand along with reduced stock has meant that tenants are seeing more of their income go on rent. This trend is consistent with many regions in provincial New Zealand.

This graph reflects how rents have grown over a period of 20 years. In March 2012, rents were an average of $273 per week. Fast forward 10 years and rents have increased to $535 per week.

However, rent increases will likely slow down as more stock transfers from sales to rentals as we have seen a slowdown in real estate activity. Likewise, fewer tenants are now moving and as more stock becomes available, we may start to see supply outweigh demand.

As mentioned, rents have grown far more aggressively compared to Auckland. At the beginning of the pandemic, the average rent in Auckland was $593 compared to Hawkes Bay where the average rent was $442 per week. This is a difference of $151 per week. Since the pandemic, the regions have become increasingly popular whilst Auckland has struggled due to virtually no overseas visitors leading to a slowdown in rents. Two years on from the start of the pandemic, rents have increased to $534 in Hawkes Bay whilst in Auckland, they have only increased to $624 per week. The gap has closed to $90 per week.

The gap between Hawkes Bay rent and Auckland rent has closed since the beginning of the pandemic.

In conclusion, as we have seen a reduction in rental stock in Hawke's Bay, rents have increased at rates in excess of 10% over the last two years. Since 2017, active bonds have dropped except for 2020 but this could be attributed to the pandemic. We expect to see rent increases slow down to more traditional levels of around 4 to 5% per annum.

* Information sourced from MBIE Rent and Bond data as well as Statistics New Zealand.