High demand in Auckland pushes rents to record high

Monday, 13 November 2023

A shortage of rental properties is helping to push rents in some regions up, but the situation might change under the new government, Trade Me says.

The supply of rentals advertised for rent was down by 10% annually in October while demand was up 6%, the property website’s latest figures showed.

Trade Me Property sales director Gavin Lloyd said renters were still having a tough time finding properties, and rents in some regions had gone up to new highs in October.

Auckland rents climbed to a new record high, with the region’s median up 10.7%, or $65, annually to $675 in October. That was an increase of $5 from last month.

It meant the region’s rents continued to be the highest in the country. In October last year, the Wellington region’s median rent was more expensive than Auckland’s.

But widespread damage caused by the January floods and Cyclone Gabrielle had left the region battling with supply issues.

Trade Me’s figures had demand for Auckland rental properties up 21% annually in October, and showed there had been 7% plus rent increases for every house size in the region.

Taranaki, Otago and Canterbury also had double-digit annual increases, with their medians up 14.2%, 12.4% and 10% to $605, $590 and $550 respectively.

Rents in the Wellington region increased to a median of $650, a 4.8% annual increase on $620 last October.

In contrast, the national median rent held steady on $620 a week last month for the fifth month in a row - although it was up 6.9% from $580 at the same time last year.

Lloyd said the national median rent had stabilised despite the uncertainty around the election, but that could change.

With National gearing up to lead the country for the next three years, there was potential for more investors to dip their toes back into the property market, he said.

“If National moves forward with their plans to tweak interest deduction rules and the bright-line test, we might see a boost in investor confidence.

“This shift could encourage property owners to offer more rentals, easing the supply pressure tenants are feeling and potentially seeing rent prices ease.

“These changes are not going to kick in until April 2024, so we are not expecting an overnight transformation.”

Demand had dwindled in most regions when compared with the same time last year, and there had been an uptick in listings in some smaller regions, he said.

“But the mix of students searching for homes and policy changes in the pipeline could really shake the rental market up heading into the New Year.”

Meanwhile, the Property Investors Federation has released an analysis of tenancy services data which highlighted the diminishing availability of rental properties.

It showed a consistent decrease in new rental bonds since 2013, with a significant drop from 2019 onwards.

Tim Horsbrugh, an executive committee member of the federation, said growth of the rental housing stock had stagnated, and with immigration increasing, a serious shortage of rentals was looming.

To address this, the new government should reintroduce interest deductibility for landlords, reinstate 90 day termination notices, allow time-limited fixed-term tenancies again, and lower the barriers for property investment, he said.

But experts have said that while changes to tax rules for landlords might lead to a slowdown in the rate of rental inflation, they would not lead to lower rents.

Property Brokers general manager property management David Faulkner has said increasing supply would ease pressure on rents, and Christchurch after the earthquake rebuild was a good example of that.

“After the earthquake, rents increased by up to 10%, but when the rebuild took effect and stock outweighed demand, rents did not increase for seven years, they stayed round the same level.”