Landlords will have little to cheer about in the latest residential rental figures from Trade Me Property.
The median asking rent for Auckland properties advertised on the website declined 1.5% in December from November, and was unchanged from a year ago. This suggests a lack of rental growth in the country's largest rental market.
The situation was even worse in the Bay of Plenty, another very popular rental market, where the median advertised rent also declined 1.5% in December and was 0.7% lower than in December 2023.
On an annual basis rents were also weaker in Canterbury -0.9%, Nelson/Tasman -1.7% and Taranaki -1.7%, while advertised rents were unchanged from a year ago in Wellington and Hawke's Bay.
Increases in advertised rents were largely confined to the provinces, with Otago posting the biggest monthly increase of 4.2% in December.
However, the sharp rise in Otago's asking rents should not be a surprise. The region's rental figures are dominated by the student market over the summer months as thousands of students return to Dunedin and sort out their accommodation for the coming year.
Because many student flats are larger properties that can accommodate bigger groups of flatmates, this tends to push up Otago's median rent at the end/beginning of each year.
So it will likely be a couple of months before a clearer picture emerges of the rental trends in Otago as the market settles back down to normal rental activity.
47 Comments
So the rental market is completely saturated with properties and the rents are now starting to fall.
So lets evaluate - if you are investor and buy a property at current prices in one of the main centres you are:
- Struggling to rent out your home
- Once you rent it out, topping up up the rent to pay the mortgage, often substantially so
- While the value of your property is likely dropping, particularly so when you consider inflation and opportunity cost.
- While rates, insurance and other maintanence costs are at historical highs and still increasing considerably every year
Yikes.
Why would a logical FHB think its a good time to buy? Taking into account what I listed above and adding the state of the economy, low net migration and an interest rate cycle that is almost at its bottom, do you think house prices are to suddenly increase for some particularly mysterious reason?
many people struggled to get anywhere near close to buying a home over the last 10 years. now is a time where there are a good amount of affordable properties are on the market without investors to compete with them.
being bottom on the interest rate cycle means it is a good time, FHB aren't overly concerned in house prices increasing in the next 2-3 years.
- Struggling to rent out your home doesn't apply to FHB
- Once you rent it out, topping up up the rent to pay the mortgage, often substantially so Also Doesn't apply to FHB
- While the value of your property is likely dropping, particularly so when you consider inflation and opportunity cost. prices have already dropped and are plateauing, hence why its a good time.
- While rates, insurance and other maintanence costs are at historical highs and still increasing considerably every rates insurance and maintenance will never, if not very unlikely to come down so this will always be a cost.
for someone looking for a home, and can afford it with good financial reasoning, now there is plenty to chose from.
Nah, well known stages of denial.
Cycle of Acceptance - Tool/Concept/Definition
I'm not so sure we have even reached bargaining stage myself.
Developers are at bankruptcy stage , falling over see
https://www.nzherald.co.nz/business/developer-of-multi-million-dollar-o…
Recent Investors are mainly denial or at least mental bargaining (you do not make a loss until you sell BullSh&^)
Long term investors are at ( I am ok I bought a long time ago, and this is valid) but I am not willing to add until the market starts rising
This is smart (NEVER ADD TO A LOSING POSITION)
Rookie should not even be commenting as his approach is to buy yesterday and never sell.
All professional traders know the adage When in trouble double
we have all seen these guys carried out of the room as well,
Make know mistake leveraged investment is trading.
Rookie should not even be commenting as his approach is to buy yesterday and never sell.
so you're not a fan of buy and hold?
never the less, anyone is entitled to comment, most commenters here are just copying what a few others say. reading the same narrative is boring.
discussion and argument provide contrast to contemplate.
Whether people could buy or not, many don’t care at this point and have lost interest when they see each month getting better.
Why pay what are still majorly overinflated prices when it will be cheaper tomorrow?
I’m not sure people these days are so cavalier about just signing up for extreme leverage on a dog box when they could have something nicer if they leave the market to fall over and pick up the pieces later…
many people struggled to get anywhere near close to buying a home over the last 10 years. now is a time where there are a good amount of affordable properties are on the market without investors to compete with them.
Who is to say there won't be more properties on the market at more affordable prices 6 or 12 months from now? Again, what is driving this miraculous recovery?
being bottom on the interest rate cycle means it is a good time, FHB aren't overly concerned in house prices increasing in the next 2-3 years.
Yeah but they should be concerned about prices dropping further if they have learned anything from the 2021 fiasco, you clearly have not.
Struggling to rent out your home doesn't apply to FHB What makes the prices stop dropping?
- Once you rent it out, topping up up the rent to pay the mortgage, often substantially so Also Doesn't apply to FHB - What makes the prices stop dropping?
- While the value of your property is likely dropping, particularly so when you consider inflation and opportunity cost. prices have already dropped and are plateauing, hence why its a good time. What makes the prices stop dropping?
- While rates, insurance and other maintanence costs are at historical highs and still increasing considerably every rates insurance and maintenance will never, if not very unlikely to come down so this will always be a cost. What makes the prices stop dropping?
Yeah but they should be concerned about prices dropping further if they have learned anything from the 2021 fiasco, you clearly have not.
now you're just speculating....
Who is to say there won't be more properties on the market at more affordable prices 6 or 12 months from now? Again, what is driving this miraculous recovery?
Who is to say there wont be less?
stocks, and crypto, mainly stocks.
Some stocks i owned was VOO, INTC, CE, MMM, XOM, FBU (guess which one i lost on :D), LNZA.
overall did pretty good, double my money on a rather small investment 20K ish.
had some decent losses too.
i sold my stocks and crypto so i had a 20% deposit to buy a property than i had been trying for 5+ years to be able to do and the time was right for me.
now after 1 year i have saved 6 months of income as an emergency fund i will start investing back in to stocks and crypto again.
One of the biggest reasons i wanted a property is i had been thrown around 5 different rentals in a year i was sick of it, very happy so far.
I'm interested to understand why you consider paying double in home ownership costs (could be more, could be less but will almost certainly be considerably more than rent) than rent for a below average home is affordable? I'm not sure all or even most FHB understand that the money they pay on their mortgage is mostly interest and very little goes to paying off the principal in the early years. As far as I can tell FHB often seem to overpay to get their offer accepted; then are on interest loading as they are under 80% LVR. So, the huge costs of home ownership compared to renting may not be building up equity & have possibly lost equity. I am fast forming the opinion that the current interest by FHB may not be sustainable.
Those FHB I have known over the years sure didn't understand table mortgages. Had an interesting conversation with 2 a while ago:
The first, after ~8 years of holding had paid off ~9% of principle.The second, after 5 years had paid off .. well, would have been 2% if they hadn't extended their mortgage by buying toys using the increasing paper equity.
Also have FHB friends who are in deep doo-doo, after we watched them desperately try to buy anything and everything as prices rose and interest rates dropped.
Meanwhile, we lived in decent rentals that cost us 40% of what our landlord's mortgage repayments would have been, and didn't have to worry about rates, insurance or maintenance bills.
We're now approaching a point in life where buying, even if more expensive than renting, might almost be the better decision (to insulate us from our landlord's exposure, and allow our children freedom to redesign as they please) - but we won't be doing it in NZ.
Why would a FHB want to take on all those costs, when they can rent for about half the cost? All whilst saving the difference, and investing it in the stock market where they can get 7-10% total returns on low risk investments. At some point in the future, they can then sell their stocks and buy a house with 100% cash like I did.
Many will claim they're doing it for altruistic reasons, when in reality they made a very poor investment decision and are trying to save face by suggesting it was all planned. They're "so wealthy" they can take the hit for the sake of philanthropy, while being a 6 week vacancy away from an uncomfortable letter from the bank.
GC is correct - different datasets. Trademe is using the asking rent prices from their listings. CPI is using tenancy bond data from MBIE.
How rent prices are calculated in CPI, HLPIs, and RPIs
Rent prices for private rentals are measured in the CPI, HLPIs, and RPIs. They are all priced using tenancy bond data from the Ministry of Business, Innovation and Employment (MBIE). A fixed-effects window splice regression model is used to measure change in rental prices derived from MBIE’s tenancy bond data.
Rentals for housing: A model-based estimator of inflation from administrative data has more information about this method.
bonds do not move up if your landlord puts the rent up tho do they?
few landlords ever drop, tho the new rent agreement may be lower then the old...
I think its hard to get a completely accurate view but it smells like rental growth stagnation across the entire portfolio
When we rented private, our bond didn't increase with the rent.
When our rental was managed, rent increases came with an accompanying bond top up. Which the manager conveniently 'forgot' about when time for the refund claim came.
Tiny sample though - we moved to a new rental far more often than we had rent increases. Consistent with the stat that the average tenancy is ~18 months.
Good point - digging further it looks like Statistics NZ uses tenant surveys to fill this gap in the bond data. The CPI uses stock measures and flow measures:
Stock measure tracks rents across all tenancies (ongoing and new) using survey data from tenants. This captures existing rate increases in existing tenancies.
Flow measure tracks only new rental agreements from the bond tenancy data. This captures current market conditions.
The tenant survey data is pulled from the Household Economic Survey (HES) which also captures household income, expenditure, and housing costs, including rent payments.
The target sample size of the HES is 20,000 households. However it varies each year:
2022 8,900 households
2023 14,100 households
According to 2023 census data there were 563,226 households renting their homes
Given these 2023 figures the tenant survey only represents 2.5% of the total renting households
That's a good sized sample though. I wonder how it's collected - thinking that there's ~200 working days in a year, that's ~70 samples per day, or 9 samples an hour. If collected by phone (and likely along with other data) and considering non-answer/responses, that would suggest 2-3 people working full time on it.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.