Rents charged on the most popular types of residential property experienced a much anticipated decline in the second quarter (Q2) of this year.
All three of the main rental property types monitored by interest.co.nz posted declines in their median rent in Q2 compared to Q1.
The national median rent on one bedroom units/apartments declined by $20 a week, from $470 in Q1 to $450 in Q2, while 2 bedroom units/apartments declined by $25 a week, from $595 to $575 over the same period.
Three bedroom houses were also $20 a week lower, with their median rent dropping from $670 in Q1 to $650 in Q2 - see the graph below for the quarterly trends for all three property types.
The drop in rents was well-signaled, with property websites Realestate.co.nz and Trade Me Property both reporting declines in the asking rents of rental properties advertised on their sites over recent weeks.
Those declines have now translated into lower actual rents being agreed between landlords and tenants.
Interest.co.nz's rent data is drawn from bonds received by Tenancy Services, and as well as indicating movements in the rents being charged for newly tenanted properties, it is also used by landlords to help them set new rent levels for existing tenancies when they come up for review.
So a drop in rents being charged for new tenants could indicate that sitting tenants may also be in line for a rent reduction.
Of the 28 major urban districts around the country where rents are monitored by interest.co.nz. 17 recorded declines in their median rents between Q1 and Q2 this year, four recorded increases and seven were unchanged - see the table below.
The biggest decline Q2 was in Dunedin, where the median rent declined by $100 a week, from $620 in Q1 to $520 in Q2.
However a large decline in Q2 in normal in Dunedin because of the high number of large student flats that are newly tenanted for the start of the academic year, which pushes up the median rents in Q1, only for it to drop back in Q2.
Compared to Q4 2024, Dunedin's median rent was $10 a week lower in Q2 this year.
Median rents were also significantly weaker across the Wellington Region, with the median rent in Wellington City taking a particularly big drop of $55 a week between Q1 and Q2, reflecting major declines in the median rents charged for all three of the major property types monitored in the city.
Going against the trend, the biggest increase for the quarter was in Queenstown-Lakes, where the median rents increased by $50 a week, from $750 in Q1 to $800 a week in Q2.
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45 Comments
So much for rents will never fall
This is fantastic news!
Every $10 a week fall is $10.4k off the asking price at 5% yield....
It seems logical the many vendors who pulled their listings will be quivering on the sidelines pining for times of old and therefore adding to future overhang come spring. There is certainly more potential downside.
Remember RP, apparently, you do not lose until you sell... by then you may have lost a lot.
Topical at bottom of screen today
One common way of judging whether housing's price is in line with its fundamental value is to consider the ratio of housing prices to rents. This is analogous to the ratio of prices to dividends for stocks.
~ Janet Yellen
I fully understand its difficult to value a beach front house, but a shit box 3bdr with converted garage renting in Manurewa for $6-$650 is simply a yield play, council won't let you develop unless you put bigger storm water down the entire street etc... Council know its cheaper to provision infrastructure green field.
650 x 52 is 33,8k less rates 2k, maintenance 2k, 29.8k at 5% is $596k max maybe less with the hassle property mgr take 5% maybe $550k
but you have to find that buyer and that buyer is looking for bargains due to "Urgent Sale Required"
Maintenance 2k? I think that's why many of these properties aren't renting, the houses just get completely out of date. In Japan they rebuild the whole house every few decades... What about depreciation?
Unless you are going for capital gains, 5% yield is pretty bad isn't it? Not much more than a TD for a lot more effort and risk.
The only reason rentals stack up is because you don't have to pay any tax...
In Japan they rebuild the whole house every few decades
Urban myth. Japan is dotted with homes built in the 70s/80s in superb condition.
Most of the large homebuilders like Sekisui, Daiwa, Panasonic offer long warranties on housing. For example, Sekisui and Daiwa provide 30-year warranties covering structural and waterproofing elements, with options to further extend the warranty every 10 years. With continued compliance, some warranties can reach 60 years or more.
https://www.sekisuihouse.co.jp/library/english/company/sustainable/p.41…
Interesting. I was under the impression they change seismic and fire protection laws and it encourages rebuild.
I have been to a few rentals in Tokyo, all seemed in great condition although none were particularly new. I guess the difference is that they build them right in the first place, they all would be insulated and double glazed etc. And the renters don’t trash them
I feel like NZ houses from the last century are now almost obsolete, and bringing them into this century is not cheap. But those owners never factored in depreciation, they assumed there would always be a shortage of houses and people would rent/buy anything.
The whole residential construction industry had to up its game from the end of the bubble - survival mode. It is also partly why companies like Sekisui are world leaders in building materials. You actually have to be competitive and differentiate when your economy is not in bubble conditions (something Aotearoa needs to accept).
Shoddy construction still exists, but it doesn't have to. And even traditional Japanese houses are still standing. They just require much care and attention.
$10 per WEEK is why the landlords cannot afford $10 per MONTH
Looks like you guys got your death star trench run scenario; massive amounts wiped off house prices and rents, and a buoyant economy and labour market!
Yes a deep recession is what Mr Orr engineered, it was pretty easy to see coming.
The crash was a result of the crazy boom and low ocr, not about wants dreams etc its pure economics text book.
Death star is another 30% lower from here. The Movie is not over, I am not sure how its going to end.....
denial, anger, bargaining, depression and acceptance
I would say that NAct polling is showing us we are midway between bargaining and depression,
we just need to get back on track and it will all be ok (sounds like bargaining to me)
Everyone is down, its winter, but if there is no recovery by next autumn then we will move to depression and possibly boot NAct out.
I don't know if it needs that big a story.
Most house buyers are still owner occupiers. Rental yields aren't much of a factor for many, and these people set the top of the market. At the moment they're squeezed with high interest rates and and meh economy and job market.
And enough are going to Aussie to make a real dent in demand.
I do not see migration picking up in this market the electorate will punish if they do not see a move to get kiwis back into jobs.
I can see another 5-10% house price falls over the next few years if this is just NZ, if global recession all bets are off, it will be carnage. Equity markets are smoking crack not green shoots.
Prices usually only rise with general economic sentiment. That's not looking to turn around anytime soon, for sure.
I won't entertain any %, because we can see appetite is as mixed as the variety of properties.
You generally don't want to going into anything aiming to achieve the aggregates.
You don't think its anything to do with increased housing supply? Surely that is the only reason that rents would go down. Unless it is reduced demand, a declining population.
I saw the tenants of a crappy 80s house down the road from us move literally across the road to a brand new terraced house. Since then the old house has had a for rent sign outside, its been at least four months. No one will pay what the previous tenants paid when they can get a nice new place for the same or less.
The days of people lining up to view rentals and paying crazy money for them has long gone. When supply exceeds demand there will always be a big drop in prices.
There has been more supply, but the theory is rents are related to incomes. And incomes are pretty flat, and the jobless rate is up.
Rents are related to supply and demand like everything else. If demand exceeds supply, then yes rents will be capped by what people can afford to pay. But if supply exceeds demand, in theory rents could freefall even if wages were increasing.
If there is an excess supply of rentals causing rents to drop, why do we have so many homeless living on the street and in cars.
Meth. Feeds mental health issues and renders people unemployable. Then there's the lack of health and mental health to help them. Don't forget the mental health facilities that used to contain these people have all been closed.
And pow...they are everywhere.
I wonder if excessive drug use is causing people to have mental health issues.
Sure it may be the underlying metal health issues causing self medication, either is not really great news to landlords or employers.
Hence the living on street
It is absolutely boosting minor issues into major ones. Ask any cop, paramedic or hospital staffer.
Pat T
In a number of cases “homeless and living in a car” is not simply about rental supply issues but rather more related to personal mental health and social issue, and surprisingly, including in some instances personal choice. (And it’s not just the mayor of Rotorua saying this)
why don’t those people pay $890 a week for the shitty house down the street from me with the for rent sign up?
Jimbo, provide a link where the rent is $890 / week in regional NZ
It’s definitely house supply. There’s always a shortage until there's isn’t There’s no coordination within the building industry to control what comes on line so when there’s a shortage it’s inevitably going to be followed by a surplus. It’s just a matter of l when. When I was in markets in the early 2000’s I remember wondering whether the mining companies were digging too many holes as there was a shortage of ore at the time and obviously to get one on line takes ages. But they all rushed to be first and boom supply came on line. I thought if 2-3 huge conglomerates can’t coordinate with a centralised Chinese government then there’s no way a fragmented building industry with thousands of suppliers will. Still think it’s a healthy thing for us sort out supply and price to create a better market. Just feel sorry for the people who paid at the top.
The government needs to do the house building when the private sector isn’t. But we always elect the wrong party at the wrong time.
Death Star? Hardly. You should know by now this screams opportunity for the discerning.
Not really, there's not that many "deals" out there. Even people with 12 month old listings aren't that interested to budge on price in any significant way.
About the only thing I see go cheap are properties that are in need of serious work. Which stands to reason, renovation costs are through the roof, finance and insurance are expensive or hard to come by, and there's no certainty the money spent will be realizable.
I actually thought things would have dropped more than this, but I think the cash position of a lot of sellers isn't as bad today as it was in 2008.
True these type drops where part of RBNZ stress tests... I am sure the banks have a portfolio of stressed lenders but nothing life threatening yet.
still as the Speights ad goes
Plenty of Time Yet!
But from these price levels (still very high) what is your exit strategy ?
Sure if you can subdivide and build maybe, but IMHO these are not buy and hold price levels yet.
there will be some good 7% ish yield opportunities if you look hard and understand how to play the game.
Meanwhile rural is alive and kicking, agent rang last week to look for listing.
Sure if you can subdivide and build
It's often better to sell that dream to someone else.
Dream / nightmare
Oh woe...How will the debt be serviced for the speculords?
🍿
NZ 10-year bond rate increasing last few days......is it sniffing out no rate cut (serious shock horror) or rate bottoming out this week (one only 25bps cut - shock horror) and then we rise again folks?
Interesting afternoon commentary coming - either way!
Inflation is the focus. Equals no or minimal rate decrease.
Equals recession. Why the National party have an obsession with a 2% CPI is beyond me, 3% inflation and growth sounds much better than 2% and depression to me.
Yes, once inflation falls below 3%, monetary policy should switch to solely focusing on the economy and boosting employment.
When I used to argue that National were idiots for taking away the full employment mandate, I’d get 0 likes and the next comment that said I was an idiot would get 50 likes. And here we are.
I always said Labour got it wrong, they needed to be more prescriptive and say CPI in band was the core goal. But this current situation was always both ridiculous and inevitable.
No, the OCR will continue downwards. I'm picking 2.5% by Feb 18.
The RBNZ will ignore their mandate of CPI at 2%? Or CPI is going to fall now after it looks to be increasing? Hard to know.
TBH if I was in charge of the RBNZ I’d be looking at a 0.25% increase. Not because that’s the right thing to do, but because it looks like CPI may be picking up again and that’s the only thing I’m meant to worry about.
The obsession with getting inflation to 2% is difficult to fathom TBH, given the current state of the economy. If unemployment was falling and consumer sentiment suddenly took off, then yes, I'd go along with your 0.25% increase recommendation. However, all signs point to our economy being on the ropes (with the exception of the farmers, but they have much higher costs than 5 years ago which takes the shine off things for them). RBNZ commentary will likely focus on the health of the economy. Any uptick in inflation will be brief, and hardly worth worrying about.
Yes indeed however with global uncertainty, if they drop too low then have another economic shock like a fuel price spike due to international conflict, we have less buffers to weather the storm and would see inflation rise again, and further degrade our living standards, followed by another blast of the OCR to once again send the economy back to it's knees, which nobody wants. I'm for the cautious approach, as enticing people to load up on more debt in an attempt to 'save' the economy is akin to fixing your hangover with a bottle of vodka and thinking all will be well due to confirmation bias.
No rising…but defo some panic slashing going to happen big G, and then panic spending by the govt…then we’ll have low rates & stimulus at the same time, ace 🤦🏻♂️…& then the same sh*tty cycle continues…it just won’t be quite as effective this time.
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