The availability of rental properties may be much closer to demand from renters in Auckland, but there are likely to be significant shortages of rental properties in many other regions.
The latest figures from Tenancy Services show the national median rent was $540 a week in July, up $40 a week (+8%) compared to July last year.
That's based on bonds received for new tenancies in July, making it a leading edge figure because new tenancies set the market rate and most landlords will generally reset rents to the current market rate when they come due for review.
However there were substantial regional differences in rental growth around New Zealand.
In the Auckland region, which is the country's largest rental accommodation market by far and also the most expensive, the median rent was $590 a week in July.
That was up by just $10 a week (+1.7%) compared to July 2021, which means in dollar terms Auckland's median rent increased by a quarter as much as the national median over the year to July 2022.
In percentage terms Auckland's 12 month increase was the second lowest in the country.
Only the Tasman region, which posted a 1% decline, had a lower rate of change.
Around the rest of NZ the only other region with an annual increase of less than 5% was Northland on 4.2%, with annual rent increases in the rest of the country ranging from 5.6% to 12.9%, with five regions - Bay of Plenty, Gisborne, Taranaki, Manawatu-Whanganui and West Coast posting double digit annual percentage increases.
The table below shows both the median rent and the number of bonds received in each region in July, and the percentage change in both compared to July last year.
It is significant that several regions - Bay of Plenty, Gisborne, Hawke's Bay, Taranaki, West Coast, Canterbury and Otago, had substantial increases in their median rents in July compared to a year earlier, while also showing significant decreases in the number of bonds received over the same period.
That suggests the rental markets may be particularly tight in these regions, with a shortfall in the number of properties available for rent compared to demand for rentals from tenants.
However it's likely that supply and demand are more balanced in Auckland, where the number of bonds received in July was up 4.2% compared to July last year, with a much more modest 1.7% lift in rents.
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55 Comments
Good news for tenants as this must clearly mean the rentals they are living in are somehow 8% better than they were previously!
Or 8% cheaper to buy now for themselves as CPI feeds into OCR, which discounts asset prices via cost of capital.
Not at all, more so the extortionate rent many are paying for absolute dumps are finally being brought down by market forces and people will go where the price is right, and nobody will rent the damp, cold crappy places for the high rent being asked.
With healthy homes, they won't even be allowed to rent them for cheap either.
Hurrah
Can't believe restaurateurs must work to food safety standards too. Healthy homes, healthy food...PC gone mad, harrumph harrumph!
Maybe we should do away with such over-regulation and but allow people to sue providers for medical costs.
Food hygiene is fairly cheap to implement.
Reinsulating floors and a ceiling is probably 10 grand on average. If you want to go whole hog, double glaze, walls insulated, etc, maybe a hundred k.
People shouldn't be living in mould, and ideally keeping a mould free home should be as effortless as possible.
But on the otherhand, if it's my want to rent a cold damp shitbox and save myself a few hundred a week that should be my right.
Not everyone needs rescuing but we all end up as if we do, and pay the price.
Decent DG to replace wood joinery I was given estimate over 30k for average size 3 bedder.
So I didn't bother after that
But if every cold damp shitbox is required to be insulated and passively mould free, then the market will find an equilibrium and you'll still save a few hundred a week.
And taxpayers won't have to be paying the healthcare costs so that landlords can make a little more profit by renting out unsafe products.
No surprise in Auckland. Massive supply hitting the market and population loss.
Some of those other numbers are awful.
ironically - as per JFoe’s position - hiking the OCR may be counterproductive in terms of rental inflation.
It will stymie new supply, and also place pressure on many landlords to raise rents
We’ve had a very low OCR for 14 years now, it’s hard to see how it has been good for renters. Houses are being built in Auckland mainly because the council isn’t stopping them from being built quite as much as they used to. A lot of these terraces would have made financial sense 10 years ago, but the council knew better so they weren’t built then.
Pre-Covid Auckland's population growth was from migration and that tap has been turned off for a couple of years so the increased supply isn't being eroded by constantly increasing demand.
Central North Island rent is too high, when less tourists arrive.
$500 per week rent, that is about the price of an average washing machine. A new washing machine every week…
Or a place where you can live, work and play. And your kids too.
In someone else’s house.
Crazy - median rent in Auckland is $590 - the same as the Bay of Plenty ($590) and not not much higher than rents in the Gisborne region ($563) and Hawke’s Bay ($550). Something has really gone wrong when rents in smaller provincial cities / regions are close to or the same as Auckland rents.
It's crazy isn't it?
We can either add a further 8% to our already $2 billion dollar annual accommodation supplement bill, or
regulate the market
Kate, we are on the same page - see my post below.
Cut the Accommodation Supplement and Working for Families completely - problem solved! No need to regulate the market like a Pinko.
Kate, I’ve signed this. Something is very wrong with our housing market and something drastic needs to happen.
Thanks! I hope it makes Parliament think really hard.
Rentals in Hawkes Bay are still thin on the ground after the flooding in Napier two years ago.
Landlords are also being very cautious when taking on new leases due to the difficulty in evicting problem tenants - the Bay is lovely but it does have its issues.
Yep although I am pretty confident that as a proportion of total rentals, one and two bedroom properties will be much greater in Auckland than other places, which will be distorting the picture a bit.
Vampire squids have taken over the regions.
Probably because rentals down here are hard to come by in the past but things have changed the supply has gone up of late. some places that were for sale have been pulled and rented instead. Gets pretty hard to make direct comparison with Auckland, it actually felt like a different country up there on Sunday, another total car wreck on the harbour bridge left lanes North bound at midday brought it all to a stop. Not sure what you mean by really wrong, if people are paying the same so be it.
I would think that the rental market in Auckland is buoyed by inwards migration much more than the rest of New Zealand. The government's move to lower the bar on immigration likely has a disproportionate impact.
Taper off the Accommodation Supplement, to get rid of it all together ! Then these greedy landlords who rent these damp, mouldy dumps and NEVER do any maintenance, will have to market their property at a "true market" rent without the taxpayer "propping up" their little property empires.
Yes, that subsidy is a noose around the country's neck. It really is quite an easy decision to just dump it altogether in one go once regulation is enacted. That's exactly what the Lange/Douglas government did for many subsidies/market protections in the 1980s.
@Kate - Actually I think the "PPP" (property ponzi party) brigade have overcooked their own goose, now that the chickens have come home to roost of higher interest rates, inflation, lack of qualified/experienced workers, young skilled people moving overseas and currently some very poor building standards (even though we had and still have the "leaky homes" debacle !!)
It is not going to end well .......and for those thinking of having a portfolio of rundown, crappy properties will save them, better think again !
Weren't you an actual developer with several homes in the good ol US of A
8% average annual increase in median rent for new tenancies in NZ (to July 2022)
3.2% average annual increase in bonds received for NZ rentals (to July 2022)
50% of the Regions had a decrease in bonds received.
Alarm bells should be ringing in government as their policies have failed tenants & it is likely to get a lot worse.
Landlords have generally experienced significant capital gains over the last few years & many have not increased rent much. Now that the environment has changed, capital gains are far less likely & there will be a significant catch up. Gross yields will need to be above the OCR & many are not.
Interest deductibility rules are being phased in, so over the next couple of years expect rents to continue to significantly increase.
The government has attacked landlords with increasing costs that make it almost impossible to justify buying an existing rental property as future cash flows in most cases will be negative.
Given that over 80% of the rental supply is by private landlords, renters can expect the growth in new bonds to continue their downward trajectory as an increasing number of landlords exit the market.
Basic economics teaches you that putting downward pressure on rental supply is such a dumb idea when there is a housing & emergency accommodation crisis. The growth in rents will only continue to increase & add to the cost of living crisis.
It is ironic that a significant majority of tenants voted for Labour at the 2020 election.
The situation is about to get a lot worse, particularly when the floodgates open to migrants to fill NZ's labour shortages.
What is your solution Tony?
Landlord
Landlords as business entities/owners have a social contract with the rest of society for good financial and social outcomes.
So if Tony is a landlord, it would be interesting to see what his views are with respect to a sustainable path forward - that will have reasonable outcomes for the finances of landlords, renters, the economy and the quality of our communities. Continuing the status quo surely isn't the answer as its increasing poverty, its increasing inequality, while landlords can no longer breakeven on their investments, and is simultaneously increasing financial and social risks.
So obviously something needs to be changed and it would be interesting to see what landlords think this is.
What I found when I researched the Hutt market late 2020/early 2021 was that more than 2/3rd of rental properties had been owned for 10+ years by the same owner. For multi-flat units - that number was nearly 100%. All of those landlords are very, very profitable as they paid far, far less for their properties than a landlord purchasing more recently. Naturally, they'll jump on and say but, but and refer to yield - and granted many of them might have purchased more and more properties off the capital gains on their older stock (and hence don't have much equity overall in their portfolio).
But the thing is, these are businesses. A sharp correction is something all businesses deal with in their lifetimes; it truly is time to regulate this rental accommodation market;
Interesting - yes those who purchased 5+ years ago will likely be fine. Its those who have been increasing leverage the last few years who might get themselves in trouble the next few years.
Most landlords I talk to only think they are running a business when it is beneficial to be viewed as that - but then when they get regulated like a business with quality standards and risk of failure etc, they don't want to be a business anymore.
Hence why in many respects I view landlording here as a rort that is having a negative impact on society as a whole. The culture is quite toxic.
It reminds me of a parasite that eats away at the health of a host (the productive economy and earned income from the renting/working class) until it dies.
A more sustainable path to making rents more affordable would be to have policies that encourage landlords to supply more rental properties. The rules should be broad-based & not discriminate between different types of landlord.
Unfortunately this means reversing much of the rental property legislation that has been passed by this current government.
The government has wasted so much money on complex rules which have significantly increased costs for landlords but that is dumb because landlords will either pass the costs on to tenants or sell their rental properties if they can’t make money.
The government’s rules will continue to see rents increasing at a faster rate than would have otherwise happened.
The growth in the supply of rental properties will also continue to be be reduced.
More renters will continue to be forced into emergency housing as they can’t afford to rent.
You refer to 'basic economics' in your initial post.
Two points on this comment with basic economics in mind:
"The government has wasted so much money on complex rules which have significantly increased costs for landlords but that is dumb because landlords will either pass the costs on to tenants or sell their rental properties if they can’t make money."
1. Landlords have always told me the market sets rents. So do landlords set rents, not the market?
2. If landlords sell their rental properties, won't that increase supply of properties available for renters to buy, and when supply increases but demand remains the same, doesn't that result in a new lower equilibrium point for prices? Simultaneously, if more renters become owner occupiers, that will reduce demand for rental properties, putting a limit on the increase in rent prices.
I've done a few economics papers during my university days so have a reasonable grasp of supply and demand concepts and externalities. Some of the things you say when you talk about 'basic economics' don't ring true to me. But you can correct me if you think what I say is wrong.
1. Landlords set the rent. In many cases landlords have the rent below the average “Market Rent” that Tenancy Services publishes for bonds it receives over the previous 6 month period because they have made capital gains. But that scenario is now changing. Typically landlords do not collect any extra bond when they increase rents so Tenancy Services do not know what the real “Market Rent” is. Many landlords follow the advertised rent prices on rental properties on Trade Me to get a better picture of Market Rent. Landlord are permitted to charge Market Rent for their rental properties.
2. Since the government introduced the new rules, rental properties that are sold are increasingly being sold to owner-occupiers or First Home Buyers and not rental property investors. In this scenario more renters are displaced than if rental property investors purchased a good share of these properties.
Some First Home Buyers live with their parents so have never rented before they buy a house so in this case more tenants are displaced. Some owner occupiers upgrade, separate with their partners or move to another city and don’t rent out their second house or bach because of the new rules.
Some renters will buy some of these rental properties and become First Home Buyers but that doesn’t improve the rental supply as typically there are more people living in a rental property than in a First Home Buyer house.
Correlation does not equal causation. The fact that in the overall statistics rental properties have more people living in them than owner occupied doesn't necessarily mean that if rentals are sold to owner occupiers then people will be left homeless.
I'm surprised he's brought up the rented vs home ownership occupancy ratios. I thought that little chest nut had all but died when people applied a little bit of critical thought. E.g. student accommodation and lower socio economic families will skew the number in one direction, while empty nesters skew the other way. I know plenty of millennial couples who are renting a 3 bedroom house to themselves (or 1 child) and I know of a couple of home owners that rent out spare bedrooms.
Landlords set the rent. In many cases landlords have the rent below the average “Market Rent” that Tenancy Services publishes for bonds it receives over the previous 6 month period because they have made capital gains. But that scenario is now changing. Typically landlords do not collect any extra bond when they increase rents so Tenancy Services do not know what the real “Market Rent” is. Many landlords follow the advertised rent prices on rental properties on Trade Me to get a better picture of Market Rent. Landlord are permitted to charge Market Rent for their rental properties.
This depends on how many properties are rented privately vs through an agency. Pretty much none of that is true if you're property is managed - except the property managers will try to use the advertised prices instead of bonds lodged in setting rental increases. I've seen first-hand where agencies advertise a couple of properties at ridiculous prices (which won't be let at) to push the 'advertised average' up and justify rental increases when the bonds lodged told a very different story.
A more sustainable path to making rents more affordable would be to have policies that encourage landlords to supply more rental properties
Land Value Tax on the unimproved value of land, liberalised zoning to allow people to build on their own land, and ramping down landlord welfare subsidies would absolutely achieve that.
"Given that over 80% of the rental supply is by private landlords, renters can expect the growth in new bonds to continue their downward trajectory as an increasing number of landlords exit the market."
Great TonyBarnett .....all that is happening now, is it's giving FHB's a much more of an "even playing field" to buy their first property or HOME - which has been proven time after time, much more beneficial to society - socially, mentally, emotionally, while providing stability and independence, rather than be at the 'beckon call' and financially "strung up" by a landlord ! (whose rent is topped up by the taxpayer, which basically goes straight into the banks pocket)
You landlords can bleat on all you like how everything is becoming so hard financially for you and that now the "numbers now don't stack" .....but can you at least please stop trying to play the "saviour" of the lower socio economic groups of NZ. You are NOT ! ......your are only in it "for the money" and to line your own pockets for now and in the future.
The savior of the "lower socio economic groups" while only renting to the displaced middle income earners (aspiring FHB) because tax advantages and loose lending conditions enabled insolvent Landlords to outbid them in the auction rooms.
Exactly !
The other way to fix the issue of terrible yields is falling prices, and this process seems to be underway already. Given you can get term deposits in the 4-5% range now, surely 5% gross yield is an absolute minimum for taking on the risk and effort of a rental property, which would support an average price (for rentals) in Auckland of ~600k.
Personally I still wouldn't be interested in 5% - I can get more than that with less effort with shares in REITs. 5% gross doesn't go far once you've covered the mortgage, rates, possible management costs, insurance and maintenance (none of which are payable on the REIT dividends).
Things sure look different when the name of the game is no longer just buying for capital gains while pretending not to have so as to evade due tax on those gains.
Yep, the yield barely stacked up when interest rates were at record lows - now they are insulting. The rental yield indicator hasn't been updated for a little while so you can probably add 10% after the recent price falls, maybe 15% if you also include rent increases. You're still looking at ~3.5-4% gross yields on Auckland property - seriously cashflow negative if you're buying today with a 60% mortgage even before you account for the ~1% of house price for expected maintenance each year.
Property is the only asset I've ever seen where people think reducing the income (added tax, compliance etc) increases the income (more rent) rather than decreasing the price.
"Gross yields will need to be above the OCR & many are not"
Prices are coming down quick enough enough for this to get sorted.
It's the problem when an asset class has for decades been bailed out to avoid anyone (nearly) ever taking a loss on it.
Then it becomes assumed that it is riskless and a cash cow.
Just noticed my median rent is $550 but I’m only charging $480. Guess I should do a review in November…
We are similar but are happy to provide an affordable rent. Currently pay low 400 with assessment $550. That policy could change if a bureaucrat starts dictating
well said independent observer
except your reference to cash cows is a bit ambitious
half the residential property investors lose money.one can assume the other half don't make much
and look at the comments above from your typical investors thinking a rent raise is going to get them through.another three or five grand in rent a year ain't going to service the typical mortgage increases that are coming
and yet consumed with greed they behave like a dutchman clutching a bag of bulbs thinking they are worth a kings ransom
they cannot see that there is no rational financial reason for a median house in auckland to be worth one and a half million.other than they think it might be worth more next year.
and so they don't sell when all the indicators and warnings are that they should.one in the bag and two in the bush and all
not with this lot.its like they are all hypnotised by glossy brochures ,story telling soothsayers and dreams
madness
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