Signs emerged of a possible softening in the residential rental market in July, with the national median rent flat and many regions showing a decline in median rents.
The latest bond data from Tenancy Services shows the national median rent for all residential properties newly tenanted in July was $600 a week.
It has remained unchanged at $600 a week since December last year, apart from January when it blipped up to $608 a week before dropping back down to $600 in February.
Essentially that suggests there has been no upward pressure on rents overall, so far this year.
However at the regional level rents tended to ease back a bit in July.
Of the 16 regions monitored by interest.co.nz, the median rent declined in nine compared to June, increased in five and were unchanged in two - see the monthly regional figures in the table below.
The declines ranged from -$5 a week in Wellington Region to -$20 a week in Gisborne, Hawke's Bay and Tasman.
The increases ranged from $2 a week in Manawatu/Whanganui to $30 on the West Coast.
While there was some downward movement in rents in the regions, the total number of properties tenanted in July this year (12,363), was almost identical to the 12,354 newly tenanted properties in July last year.
That, and the latest rent data, suggests supply and demand of rental properties is probably fairly well balanced overall.
However, if the slight softness currently apparent in the regional figures continues for another few months, that could signal a move towards an oversupply of rental properties, and the pressure on rents being downward and in tenants' favour.
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60 Comments
Spoke with a Wellington landlord a couple of days ago. Told me they've been trying to let the 4-bed next door since a group of students moved out at the start of the year. Not happy with their property manager.
From my perusings, Wellington rentals (for 3 and 4 beds at least) appear to be at or cheaper than they were mid 2021. With more and often better options available.
Can't see this turning around anytime soon. In fact, I think we are going to see a wave of investors capitulating in this market.
Why? Now like a normal business, interest can be deducted again so no need to increase rents.
I'm not sure they were. My assumption is that they (or maybe more correctly, their property manager) failed to consider how quickly and significantly the rental market has shifted. Similar to the market for sales, they would have been wise to get ahead of the pack and save themselves 10's of thousands by dropping the rent (for those selling, this could be 100's of thousands saved, and the difference between a selling and not).
Victoria University went woke, and is now going broke. "Victoria had 17 percent fewer domestic enrolments than in 2021"
https://www.rnz.co.nz/news/national/526147/universities-finances-worse-…
Well thats a myopic boomer view.
First year was free in 2021. Of course they had an elevated amount of enrolments when it was free.
Also 5 percent lower than 2023, which makes them the lowest since at least 2014. I doubt being woke has anything to do with it tho.
I don't think being woke has much to do with them going broke. More likely because they shifted focus from education to property investment. They've now found themselves at the pointy end of this correction.
Wellington is stuffed thanks to the the three last mayors..
This says it all. ..
https://www.nzherald.co.nz/nz/pandoro-closing-its-three-wellington-cafe…
They have progressively closed the city down while neglecting infrastructure and costs.
I'd love to see how they tender things these days ..
Tenders are easy...
1.Put high standards in place.
2. Go world wide
3. and take the cheapest price.
4. Seek guarantees..
5. No cost overruns accepted
Judging by a few Wellington FB pages, it's ironic that the people who complained the most are the ones that could be bothered going to vote on their local election day!
And there you have it, Labour causes increases in costs with their interference, National improves things for renters by reversing Labours absurd policies. AND that is with the absurd rates & insurance increases.
Little to do with the parties in power in my opinion. This is systemic, and has been a long time coming.
I think you will find it's 100% tax deductablity. Labours influence on rent increases.
Nope. Only Partly.
Laws of supply and demand:
- lots of supply coming on line
- less demand (reduced population growth etc)
Interest deductions back and interest rates falling means many landlords are no longer in a position of raise the rents or go broke.
There is always more at play than just the cost input. But this will be a large part of it.
You really think that had a massive influence ? A business thats technically insolvent or negatively geared in landlord speak, was and is just ringfencing losses.. The losses were smaller with less deductability. Net actual cash (not make believe cg cash) position is still as crappy now as it was before. If you survive the years of pouring cash in the front door of your intentionally loss making company you will eventually be able to use those tax credits.
Financial freedom and elysium awaits.
Agreed. It's amazing the effect of even a small increase in supply has to rental competitiveness.
(Re-zoning for higher densities in Wellington happened way later than 2016 when Auckland did it. But the effects will be exactly the same.)
LOL ..yeah like the sympathetic caring landlords have passed on their billion dollar tax break to their grateful tenants.
And when interest rates kept dropping,they lowered their rents....yea right.
That's not how it works. It works by bringing more landlords in to the market through them buying the much cheaper older properties, thereby increasing rental supply, offering lower cost houses instead of expensive brand new ones, at lower rents. Eventually the supply pressure means existing landlords are forced to lower rents to compete with the new landlords, and to retain tenants.
See the massive increase in rental supply since National took office. https://johnbutt.substack.com/p/inventory-charts
Lol, you can hardly credit the additional rental supply to the current government. It's 100% due to the tax deductability being removed by labour, shifting all investor classes to building new vs investing in old properties. The current supply coming online now was consented 2-3 years ago as a direct result of all the investors wanting to maximising after tax profits.
High inflation and higher interest rates resulting from covid have put a spanner in the works but reviewing this from a long term average, it was the most meaningful government policy intervention with a direct positive outcome to renters in the last 40 years.
Unfortunately for renters, our new PM is a landlord and cares more about his bottom line than building an equitable NZ society..
If your argument was true, there would have been a steady increase in the rental inventory over the last few years - but its actually just jumped up in a matter of months post the tax change. Secondly, building consents have been FALLING not increasing since March 2022, so how is supply increasing as the amount of building is reducing??? It doesnt take 3 years to build a couple of townhouses.
"It works by bringing more landlords in to the market through them buying the much cheaper older properties, "
Resulting in property investors outbidding owner occupier buyers in the existing dwelling market (and low levels of housing affordability for owner occupier buyers) and the lowest rates of home ownership in NZ for over 70 years.
If dwellings were more affordable in the ownership market, then home ownership rates would be higher, meaning fewer dwellings needed in the rental market and fewer households requiring accommodation supplements for rental in the private rental market and fewer households requiring social housing ( and fewer households on waiting lists for social housing) and fewer households requiring emergency housing.
Let me fix that for you ...
And there you have it, Labour causes increases in costs with their interference, National improves things for renters by reversing Labours absurd policies. AND that is how wealth gets transferred from the poor to the rich via government having to borrow more to give LLs a tax benefit - which all have to pay back - while the richer (LLs) pocket the spoils.
Great to see landlords passing on those interest rate cuts and interest deducibility taxes so quickly.
They really are the shining light of how to run business properly in NZ and keep their happy tenants - happy.
Edit (we are giving notice shortly - better cheaper in the neighbourhood)
It's a good time to be looking at buying. Only rented a few years myself then we purchased a house.
So you've bought one of those cheap, imported Chinese crystal balls, then Zwifter?
I'd recommend spending a bit more next time.
My crystal ball shows we're in the same situation as we were in back in the 70s and house prices stood still for 10+ years. Actually, in the 70s central government forced local governments to free up more land but this time they've done that AND forced higher density zoning changes.
So you've bought one of those cheap, imported Chinese crystal balls, then Zwifter?
A bag of fortune cookies perhaps
A free tip for you, the time to buy is as soon as you can afford to buy. No crystal ball required. Not too many smart people still renting when they can afford to buy something.
"as soon as you can afford to buy"
You mean applying for a few credit cards and max them out for a deposit?
Tell that to the FHB that could afford to buy at the peak and have lost all their equity and now can't sell without topping up the buyers price with their own money so they can pay back the bank.
Some people are only able to learn and see the world through their personal experiences and unable to learn and see the world through other people's experiences.
These people are blind to their blindness.
There is another group of people who are primarily concerned about their own self serving interests and not concerned about their wider community.
Tell that to everyone who bought in 2021
(we are giving notice shortly - better cheaper in the neighbourhood)
And that is exactly how rents come down. New landlords entering the market compete with existing landlords for tenants, and in an over supplied market, rents decrease.
Labour prevented new landlords from entering the market with their tax and other stupid War On Landlords policies, reduced the market down to a supply of expensive and unattractive brand new 2 bedroom dogboxes that were massively cashflow negative, and then wondered why rents went up. As they say, "its not rocket science".
You can't live in a landlord. Where have these 'spare' houses magically appeared from?
Nothing to do with young people fleeing in droves KW as our spluttering economy nose dives (worse than the GFC)...?
"War On Landlords policies"
That is political rhetoric of certain political parties to get a certain category of voters to vote in a popularity contest.
Another way of describing the policies of the previous government is "pro owner occupier buyer" in the existing dwelling market". The previous government prioritised owner occupier buyers over non owner occupier buyers in the existing dwelling market.
The high interest rates and lack of deductibility have definitely played a part in my rent reviews. Both factors are being addressed so rents plateau.
"so rents plateau"
Baptist, who are you trying to fool? Landlords would raise rents if they possibly could. There is only so much blood that can be viably sucked from the host.
Yep my landlord literally told me that with a straight face. Said they wanted an extra $50 a week, because another house nearby was listed for that.
If they can get more they will at any opportunity, and the agents stoke the fire even further.
Rates up. Insurance up. Rents dropping. Educated future good tenants departing. More new stock allowing remaining renters an entry point.
Definition of "winning"...
Rates & insurance up…but maybe the vicious spikes for those two was this past year so yep continuing up but smaller jumps…fuel down, rent down…big A Orr has killed local retail/demand pull…then oil went & dropped on him…deflation on the horizon maybe…🤣
Would be interesting to know how many of those moving to Australia were renters. I suspect that has been a large driver.
Going by Facebook, a lot were home owners, who have rented their house out because they couldnt sell it in the current market. Eventually this stock will be sold, once the owners realise that prices are not going back to 2021 levels any time soon, while they are missing out on buying in the booming Aussie market.
Their market won't be booming for long, then we'll be hearing the same stories from across the ditch as we've heard here since prices started dropping.
"while they are missing out on buying in the booming Aussie market"
As market prices rise, there is fear of missing out in the ownership market. Not a good reason if house prices are at elevated risks.
What a difference a change in Govt makes. Still to come is the roll back of the tenancy laws around termination and fixed term leases that come in to effect next year that will bring even more rental stock back in to the market. But in the meantime, its clear that the change in Govt policy is helping reverse the damage that Labour did to tenants during their War On Landlords.
Rental inventory is now at an 8 year high. https://johnbutt.substack.com/p/inventory-charts
100% wrong.
Yeah, its an absolute coincidence that at the exact same time as National changed the tax laws back, rental inventory shot up. Prior to March, rental inventory was normal - and yet there was no change to interest rates, building rates, unemployment, or anything else leading up to (and after) March.
You must think its a miracle sent by God?
Yes it is a coincidence. The fall in rental properties prices coincides with the outcome of Labour's excellent housing policies which encouraged investors to build new houses to get interest deductibility rather than buying up existing stock. It takes time to build.
But hey, you do you.
Good stuff. Should make 'investors' think twice.
Another nail in the coffin for speculators
fascinating that Wellington is only down $5 per week, from where i am sitting its more like $50-$100 a week at least, so many properties just sitting there vacant not being let because the market wont pay what the landlord wants. Talking to some tenancy managers - Airbnb market in Wellington is struggling so lots of landlords switching the properties to be ordinary rentals, plus home owners struggling to sell "mostly because the market wont pay the price they want" and so there is a flood of accomodation in Wellington, at the same time people are losing jobs and wanting to break existing tenancies... not a great time to be a landlord in Welly.
It takes a while to flow through as my understanding this data is based on new tenancies. It takes a while for people to decide to move to take advantage of the lower rental prices now coming online.
Also good to remember that Landlords do not pass on any savings they make though reinstatement of interest deductibility or lower interest rates to existing tenants. Lower rents come through the new increased rental supply coming online forcing new tenancies to be set a lower prices.
haha yea because people will move houses to save $5-20 per week..
Landlords do not pass on any savings they make though reinstatement of interest deductibility or lower interest rates to existing tenants
True, and interest deductibility gives them room to lower them more, especially with rates and insurance increasing.
haha yea because people will move houses to save $5-20 per week
If it's a better property they will. Even without a lower rent.
Correct. Especially as people were forced to live in slumlord shitholes due to lack of alternative choices. Not only are prices coming down, the quality of the house you can rent for that $20 less if far better. Helped by owner occupiers fleeing the country at some of the highest levels ever.
Is the flight of New Zealand Citizens indicative of a population that is happy with the direction the govt is taking?
The flight of nz citizens started when labour drove the economy in to the ground by printing an excessive amount of money, on top of what they needed to spend on their woke projects. Now the 2 people the did it, spendcinda and grant borrowertson have run for the hills.
Lower rents come from new landlords offering cheaper properties. I can buy a $720k brand new townhouse and it would rent for $550 a week - a 4% gross yield. Or I can buy a $450k older unit and rent it for $450 a week - a 5.2% yield. As a new investor to the market, which one would I buy? As a tenant, which one would I prefer to rent? Reinstatement of tax deductibility equalised the choice between old and new properties, and landlords are now going with the one that actually makes sense for both the owner and the renter.
Labour's policies did absolutely nothing to lower house prices for buyers, and all it achieved was to make renting far more expensive, and forced tens of thousands of families into public housing.
Increase in supply in the rental market from 2 sources:
1) owner occupiers moving abroad to check out the new location for job opportunities (e.g Australia). Not wanting to sell until assessment of new location and job prospects so renting out their property for the tim being.
2) vendors wanting to sell previously but didn’t like the price being offered, so renting out the property until improved market conditions in the ownership market.
Same article written at this time of year every year for the last 10. There’ll be one in January or February 2025 saying rents are rising quickly. Repeat ad nauseam.
Always risky to be flippant but mid winter is always a bad time to secure tenants so advertised and rents secured are always lower.
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