Rents up, number of new tenancies down as rental market tightens

Property

Housing rents rising, but not as quickly as house prices, bringing mixed fortunes for landlords

9th Jun 15, 3:31pm by Greg Ninness

The national median dwelling rent has risen by $50 over the last three years, but the number of homes being newly tenanted has declined by 22% over the same period, according to the latest figures from the Ministry of Business, Innovation and Employment (MBIE).

The MBIE figures, which are compiled from new tenancy bonds collected by its Building and Housing division, show that the national median rent was $360 a week in May, up 16% compared with the median rent of $310 a week in May 2012.

However over the same period, the number of bonds received by MBIE has dropped from 13,907 in May 2012 to 10,877 in May this year.

A rise in rents occurring at the same time as a decline in the number of properties being let out to tenants suggests the rental market is tightening, with demand for rented accommodation growing faster then the supply.

The same trend is particularly evident in the bond figures for Auckland, which show that the median rent for a three bedroom house in the region increased from $495 a week in May 2012 to $575 a week in May this year (see table below), an increase of $80 a week (16.2%), while the number of bonds collected for newly tenanted homes dropped by a third over the same period, from 438 in May 2012 to 295 last month.

For two bedroom flats in Auckland, the median rent has climbed from $350 a week in May 2012 to $420 in May this year.

In Wellington the median rent for a three bedroom house was up $50, rising from $450 a week in May 2012 to $500 a week in May this year.

The median rent for two bedroom flats in the capital increased by $25 to $350 a week over the same period.

The biggest increases were in Christchurch, where the median rent for a three bedroom house increased from $340 a week in May 2012 to $450 in May this year, up a whopping $110 a week (32%).

However according to MBIE, rents appear to have stabilised in Christchurch, where the median rent for a three bedroom house ($450 a week) has remained unchanged since August last year.

While rising rents may be bad news for tenants they could bring mixed fortunes for landlords.

Landlords with existing properties, especially those purchased several years ago, should be benefiting from rising rental income.

But the latest figures from Quotable Value suggest that dwelling values are rising more quickly than rents, particularly in Auckland where the average dwelling increased in value by 16.1% over the last year.

That will likely reduce the rental returns on newly acquired investment properties, with anecdotal evidence suggesting net rental yields on newly purchased residential properties in Auckland are now likely to be under 4%.

That could leave their owners exposed if there is a downturn in the housing market and/or an increase in mortgage interest rates at some stage.

See below for the rental figures in the main centres of Auckland, Wellington and Christchurch:

AUCKLAND RENTS
	3 Bedroom House		2 Bedroom Flat
	Median Rent $/week	No. of Bonds	Median Rent $/week	No. of Bonds
May 2012	$495	438	$350	221
May 2013	$550	398	$370	307
May 2014	$550	373	$395	261
Jan 2015	$570	289	$400	246
Feb 2015	$597	258	$410	191
Mar 2015	$580	401	$400	249
April 2015	$575	255	$420	187
May 2015	$575	295	$420	211


WELLINGTON RENTS
	3 Bedroom House		2 Bedroom Flat
	Median Weekly Rent	No. of Bonds	Median Weekly Rent	No. of Bonds
May 2012	$450	211	$325	133
May 2013	$460	214	$340	130
May 2014	$490	177	$350	112
Jan 2014	$495	178	$350	117
Feb 2015	$525	282	$375	114
Mar 2015	$510	240	$370	143
Apr 2015	$520	156	$375	75
May 2015	$500	131	$350	109


CHRISTCHURCH RENTS
	3 Bedroom House		2 Bedroom Flat
	Median Weekly Rent	No. of Bonds	Median rent $/week	No. of Bonds
May 2012	$340	599	$240	337
May 2013	$410	363	$300	192
May 2014	$450	378	$339	188
Jan 2015	$450	376	$325	216
Feb 2015	$450	289	$350	144
Mar 2015	$450	401	$345	190
April 2015	$450	318	$340	183
May 2015	$450	345	$340	207

Source: Building a & Housing Group, MBIE.

Our free Property email newsletter brings you all the stories about residential and commercial property and the forces that move these huge markets. Sign up here.

To subscribe to our Property newsletter, enter your email address here. It's free.

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.

26 Comments

by BigDaddy | 9th Jun 15, 3:48pm 1433821707

Blame the Reserve Bank's LVR rules for starters.
Had it not been for these rules more people could have frozen house price inflation and got into a home of their own.
Instead they must pay ever increasing rents as house prices escalate faster yet ahead of them.
Unintended consequences indeed.

by J.C. | 9th Jun 15, 5:20pm 1433827236

What? Did you have both scenarios modeled? Or is this snide man-on-the-street wisdom?

by bw | 9th Jun 15, 4:00pm 1433822435

At what stage does the New Zealand economy collapse under the weight of Private Debt? More and more of whatever disposable income households have is going into property in one form or another. When there is no more left to apply; when it's all gone on food, petrol and property expenses, we'll perhaps understand why other all other business have collapsed through lack of patronage. It's a downward spiral. As businesses close through lack of sales, tenants and mortgage payer alike lose their jobs. Historically, higher wages was the answer. No more. An aging workforce fighting technological change has no bargaining power, and as wages fall or disappear altogether, what happens to the landlords and the banks when their customers have nothing left to offer?

by steven | 9th Jun 15, 4:25pm 1433823953

"no more left to apply" why do yo think the CPI is almost zero?

"nothing left to offer"
a) What we see then is robbing Peter to pay Paul. To me we have started into this stage moving into "if they have nothing to offer we'll find ways to take it anyway" monopolistic practices, parasitic I call it. End result is those sectors without this Govn approved leverage suffer ever increasing deflation until they fold.

b) I think ANZ said it wanted to move into India? where there is a rising middle class most of which have little or not debt. Hopefully the Indians have more sense than to allow them in.

"what happens to 8>--- the banks" Kunstler sums it up well, short version lynch mobs hang them from lamposts.

by sharetrader | 9th Jun 15, 4:47pm 1433825247

we will soon see layoffs as consumer spending slows, with more going on increasing house payments whether it be to buy or to rent. Wage inflation is way behind so what will the government do? increase WFF or accommodation supplements then how are you going to pay for that.
this has taken years but could all be fixed quickly if we have another GFC

by cowboy | 9th Jun 15, 4:51pm 1433825501

There is a move towards advertising sponsored services (he said on "free" interest.co.nz.
Then the cost of providing a service is forcibly spread across ALL the customer base whether they like it or not, so it disappears in the "cost of doing business" "hidden costs" (advertising and promotions)

by fat pat | 9th Jun 15, 6:07pm 1433830034

Don't forget the government is sucking money out of the economy by running a surplus. I wonder what the magic number is - what private debt to GDP ratio will cause the system to implode 180% 220% ?

by steven | 9th Jun 15, 9:31pm 1433842316

Hmm, how keynesian of you. When we see so little growth and inflation I wonder if we are indeed in a pretty dicey situation.

by rjf | 10th Jun 15, 8:22am 1433881355

If public debt can be reduced then tax can be cut or spending increased. I don't think a surplus is a bad thing (within reason).

by cowboy | 10th Jun 15, 8:54am 1433883252

A modest surplus is a good thing but everyone has a pet project and voters to pacify.

by fat pat | 10th Jun 15, 2:32pm 1433903553

Not according to Steve Keen. A government is not at all like a household or business in that it does not need, nor is it desirable to balance the books - apparently. Without government injected cash, our economy is reliant on commercial bank loans to grow the money supply. Given that our private debt in NZ is already dangerously high at around 160% of GDP - It seems irresponsible to run a surplus and encourage / rely on private borrowing. Talking about running a surplus is fine, but actually doing it is not okay.

by jerry_NZ | 9th Jun 15, 4:48pm 1433825328

Just on the first of June my landlord increased the rent by 15%. It was explained by the higher maintenence costs and the market. they did NOTHING over 5 years as I'm renting the place.
Hate renting but obviously i'm not in the position to buy with the current house prices .....
oh ... did I mention that it is an asian owner having 5 properties in auckland?

by cowboy | 9th Jun 15, 5:00pm 1433826036

generally that will be the increase in rates and insurance costs. It's not worth bumping it up by a few dollars every few months to cope with those rises, so you will tend to get hit every few years instead as they mark-to-market the rent. You can always shift out to another place locally if it's higher than value for what you're getting..... if you can't then really you are technically getting best value for what you're paying.

One of the few ways out of that (which is no different to the service supermarkets give) is to buy your own asap, lock in that market price, and deal with the interest cost of your actions. That's the step my wife and I took some twenty years ago. I was on the "save under your interest&costs are under what is paid in rent" bandwagon but I could just never seem to get ahead. Hence my concern about "generation rent" - I don't think that it's really feasible when there is inflation, as the sooner someone can lock in a value then better for them. For "Generation Rent" to occur the whole price model must change so rent can be delivered cheaply, while the houses still retain value. ie the yield must be enough, but capital gain stationary, to make purchase optional. Relying on rent vs cost of ownership misses many of the important factors (especially those affect the low income people)

by sharetrader | 9th Jun 15, 5:30pm 1433827815

sounds more like they have got to leveraged paying for higher priced properties without the yield to service them. check your area to see if its market rate
Can I have the rent reviewed?

If you feel like you’re being overcharged, you can apply to the Tenancy Tribunal to have your rent reviewed. If the tribunal finds that your rent is substantially higher than the rents of similar properties in similar areas, it can order the landlord to drop your rent to market prices. You can check out the Tenancy Services website how much the market value of your property should be.

by cowboy | 9th Jun 15, 5:53pm 1433829232

Which is why you should, as landlord, always keep the rent up to market level, even if you do no work to a place. because you can set it low and suffer, but you cannot recoup any loses even if the tenant signs the contract and appears ok with the rate because the socialist judges will steal it from you.

by two otherguys | 9th Jun 15, 6:03pm 1433829826

Did your rent go down when Bollard reduced interest rates by 1% back 3 or 4 years ago? If your landlord didn't pass on those savings at that time, then it's a bit rich that he should now raise rents in response to rises in interest rates

by BigDaddy | 9th Jun 15, 5:47pm 1433828847

Sharetrader: Your advice is the worst possible. If a tenant takes his landlord to the Tribunal, he may as well given himself an eviction notice. Complaints should be dealt with face to face.

by cowboy | 9th Jun 15, 5:57pm 1433829461

If you cancel a tenants contract for using his right of going to the Tribunal you may find yourself on the end of disciplinary revenge from the Tenancy Tribunal - remember those guys have zero respect for an owners right to their property.

by don'tgetmegoing | 9th Jun 15, 6:15pm 1433830517

If you want full rights to your property, do not rent it out

by cowboy | 9th Jun 15, 9:22pm 1433841777

It's not about full rights, it's about unequal rights.

The tenant may request things from the tribunal, and the tribunal will use the law to strongarm things out of the owner, but seldom can the owner apply similar pressure to their tenants, even if the tenant has previously agreed.
Just take the contract termination under the residential tenancy act. Tenant gives 21 days. Landlord 90.

Tenant damages the property has no money, tough luck landlord.
Landlord can't afford to fix a broken aircon unit, tribunal will rule that aircon was there, even though tenant was advised _in_writing_ that unit wasn't operational and rent set on that understanding, tribunal will rule that because a unit was visible the poor wee tenant should expect that it is fully working, fix it immediately, if landlord has no money then tough luck landlord.

2 personal experiences.

by steven | 9th Jun 15, 9:33pm 1433842431

Just why we'd see rises when the RB is probably going to cut this year is strange. That would be a tide going out moment leaving the banks exposed event and the wrath of the voters isnt something the banks want IMHO.

by Guido | 9th Jun 15, 7:21pm 1433834497

Kiss goodbye to your chances of prosperity, property Investors will capture it all.

by tim12 | 9th Jun 15, 7:18pm 1433834282

$600/wk rent from an $830,000 dollar house, along with high rates, and I'd imagine expensive tradesmen, good luck with that. Rents need to go up for that to make sense. ( maybe like $950?)

by ian64 | 10th Jun 15, 9:28am 1433885326

I rent through a relativley small real estate agency in Auckland. rented last two places from them. They are reasonably strict on how well we keep the properties but being that we are Southern European, we leave the house in even better conditions that we find (I install curtains, draft blockers etc out of my pocket because NZ houses are shit to start with). On the other hand they are very efficient and fast on repairs. Sometimes they send in repairmen after the inspections even if it's something minor that I could fix or that wouldn't need fixing at all. Yeah they tried increasing the rent after one year. i told them that's fine find another tenant then, so rent didn't increase...

by bob | 10th Jun 15, 10:02am 1433887350

Didn't someone writing a book on renting recently say:

"“There is no housing shortage in Auckland,” said Eaqub. “If there’s a real shortage of houses you would see both house and rental prices rising. In Auckland, that’s not happening.” ?

by Roelof | 10th Jun 15, 10:10am 1433887858

bob... yes I believe u are correct...

Housing rents rising, but not as quickly as house prices, bringing mixed fortunes for landlords

AUCKLAND RENTS

WELLINGTON RENTS

CHRISTCHURCH RENTS

26 Comments