Extra burdens on landlords 'major factor' in rental inflation, says National

Friday, 24 January 2020

Opposition politicians have seized on a suggestion from Statistics NZ that government regulations have helped push up rent rises, which are now at their highest level in more than a decade.

Statistics NZ said rents rose 0.8 per cent in three months to the end of December, taking the annual average increase to 3.1 per cent, which is the highest annual increase since 2008.

Prices manager Paul Pascoe said the rise reflected the high demand for rental properties in parts of the country but also said that the Healthy Homes Standards introduced in July were a factor.

Those rules set minimum standards for heating, insulation and ventilation, and Pascoe said some landlords may have passed on the cost of upgrading their properties to tenants.

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ACT Party leader David Seymour said Labour's new rental standards had been singled out as a reason for the rent rises.

Adding 'red tape' was the opposite of what the Government should be doing, he said.

'Labour has imposed new bureaucracy on landlords, attempted to ban overseas property developers, and banned letting fees,' he said.

'The latter have now simply reappeared in other forms.'

What the Government should be doing was freeing-up land supply to bring down the cost of housing, he said.

National Party finance spokesman Paul Goldsmith said in a statement that the rent rise was 'massive' and also blamed 'additional burdens on landlords from this Government' as a major factor.

Associate Housing Minister Kris Faafoi responded that there were many factors influencing rents.

'It would be difficult to attribute the latest movement in rents to the Healthy Homes Standards alone,' he said.

A minimum level of adequate healthy accommodation was a basic right, he said.

The standards had been been well-signalled so landlords had time to spread out the cost of any work, he said.

A spokesman for Faafoi clarified that under the existing Residential Tenancies Act, tenants could go to the Tenancy Tribunal to challenge rent rises that raised their rent substantially above rents charged for similar properties in comparable areas.

Statistics NZ said the average annual rent rise was 4.5 per cent in Wellington, 1.9 per cent in Auckland, 4.9 per cent elsewhere in the North Island, and 1.5 per cent in Canterbury.

The rent rises, higher international and domestic airfares, and petrol price increases helped push up annual inflation to 1.9 per cent in the year to the end of December, it said.

Transport costs rose 2.1 per cent during the December quarter, largely driven by seasonal rises in international airfares, which increased 9.3 per cent, Statistics NZ estimated.

Petrol prices were up 1.6 per cent in the quarter with the average price of a litre of 91 octane petrol, after discounts, rising 3c to $2.14.

Most analysts had been expecting annual inflation to rise from the 1.5 per cent figure recorded for the year to the end of September.

But the quarterly increase in the Consumer Price Index during the final quarter of 2019 was higher than most analysts expected at 0.5 per cent.

The inflation figure appears to make it even less likely that the Reserve Bank will opt to cut the Official Cash Rate (OCR) from its current level of 1 per cent when it releases its next monetary policy statement on February 12.

The rise in inflation and the corresponding increase in the gap between inflation and the OCR means the existing cash rate is more 'expansionary' than it was when the Reserve Bank last set the OCR in November.

ANZ on Tuesday axed its forecast for a later rate cut that it had 'pencilled in' for May, in part because it believed inflation was looking like it was 'sitting close to target'.

ANZ had correctly picked a 0.5 per cent quarterly rise in inflation, taking the annual figure to 1.9 per cent, but ASB, BNZ, and Westpac all picked a 1.8 per cent annual rise.

The Reserve Bank forecast a quarterly increase of just 0.2 per cent in its November monetary policy statement, which would have taken the annual rate to 1.6 per cent.

ANZ said the Reserve Bank should be 'feeling pretty comfortable with the current state of play', in the wake of the inflation figure.

'Core measures of inflation are at or close to 2 per cent and the economic data pulse has recently improved.

'We expect the OCR will be on hold at 1 per cent for the foreseeable future, barring global shocks.'

But Infometrics economist Andrew Beattie said not everyone would be happy.

'Although it's good to see the economy heating up a little, the points of price pressure are not going to be well received by all,' he said.

'High rental price growth reflects the housing shortage and regulatory standards imposed on landlords, while rising insurance costs are becoming harder to swallow.'

Statistics NZ said it detected and corrected an error in its previous calculations for domestic airfares that it had been using for more than two years, but said it was too small to have impacted the overall inflation figures it released over the period.

In October, it reported an unexpectedly large increase in price of domestic airfares of nearly 16 per cent for the September quarter.

Air New Zealand said at the time that the reported increase was 'much higher than what our own data suggests', but Statistics NZ had initially stood by its calculations saying that it was confident in the data it had published.

Pascoe said the September figure had now been revised down, but not by much.

'It was 15.7 per cent and is now 13.6 per cent. So it was previously overstated by a small amount.'

Statistics NZ said it corrected such errors as soon as practicable.

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