Rent crunch hits, and there's worse to come

Thursday, 29 November 2018

Prices have risen fastest in regional New Zealand.

If you want a rental property in Wellington this summer, you'll need to be prepared to pay 10 per cent more than you did last year.

Trade Me has released its latest rental property data, which shows the median rent landlords are asking in the Wellington region is now $495.

In Wellington City, the median weekly rent is just $10 less than Auckland, at $540.

Auckland's median was $550 for the seventh month in a row, up 4.8 per cent on last year.

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* Landlords, not tenants, should pay property managers**

Head of Trade Me Property Nigel Jeffries said rents in Wellington typically start heating up in December but this year had kicked off early.

'Demand in the capital is massive, with 13 Wellington rentals in the country's top 20 most popular rental listings during October. It's just the beginning too, summer is around the corner and rents look set to break the $500 mark for the first time.

'Aside from the headline rental asking prices, tenants looking for a property in Wellington City have some good news in that there has been a 15 per cent boost in the number of listings. But of course the demand is extraordinary and showing no sign of letting up.

The median rent landlords are asking in the capital is now $495.

'Tenants looking for a property are facing tough competition and it's only going to increase as more do the traditional 'summer shift' as tenancies come up for review and university students come to town.'

Wellington's most popular rental in October was an affordable one-bedroom unit in Petone which had 73 enquiries in its first two days.

Infometrics economist Gareth Kiernan said there could be some relief for renters in the capital - the property market was slowing generally and that should spread into rentals before too long, he said.

Jeffries said rents in Northland (up 10.5 per cent to $420) and Waikato (up 6.3 per cent to $420) reached new highs in October and crept closer to Auckland prices.

The median weekly rent in Whanganui (up 13.3 per cent $340) was another region to break a record in October while every other region saw a year-on-year increase.

'Supply is struggling to keep up with demand across the country after a 3 per cent drop in the number of rental listings year-on-year. With rising house prices, we suspect it's taking Kiwis longer to save for a deposit and as a result many are having to stay in rentals longer,' he said.

Jeffries said the number of inquiries received for Auckland rentals in their first two days on the site was up 20 per cent, year-on-year.

Manukau City was the most popular place to rent in October, with a 38 per cent increase in the number of inquiries in the first two days on the site.

'While rents in Auckland have remained relatively flat over most of 2018, we are expecting they'll heat up in the summer months as tertiary students return and supply continues to battle to meet demand. We predict Auckland rents will get very close to the $600 mark early next year.'

As of December 12, property managers will no longer be allowed to charge tenants a letting fee. Agencies are moving to higher commission structures or 'tenancy fees' for landlords.

But Matthew McMillan, of Pukeko Rental Managers, in Hutt Valley said that could eventually leave landlords better off.

Landlords were putting their rents up to cover the fees, he said.

'Pukeko Rental Managers has never charged tenant letting fees and we certainly won't be charging owners in future. As a result of the ban, we're seeing a big increase in investors switching to Pukeko Rental Managers to avoid the new fees other property managers will be charging.

'But the idea that it will result in lower rent increases just doesn't hold water. If you have two identical flats, one managed by Pukeko Rental Managers and one managed by an outfit that's charging the new fees, it's just not reasonable that our client will set their rent any lower than the other guy. Market forces will apply, and the higher rent is going to be the new benchmark.

'Savvy investors are realising they can have their cake and eat it; they can reduce their costs by switching to an efficient player like Pukeko Rental Managers - but also benefit from the higher rents caused by the ban. So that's great news for owners, but I'm pretty sure that wasn't the government's intention.'

Mike Butler, of lobby group Stop the War on Tenancies, said the increases in rent would not last forever.

'These increases will continue while demand for rental housing is strong. High demand means that owners can currently pass on extra costs to tenants instead of having to absorb them. The high demand won't last forever, because new properties are being built and immigration can decline or be reduced.'