Rents fall as landlords face up to changed reality

Saturday, 15 February 2025

There were 12,769 homes listed for rent nationwide on Trade Me on Monday.

Wellington landlord Peter Ambrose is a veteran of the business, but he has struggled to secure tenants for his rentals this year, and that has led him to reduce the rents.

He is not alone. Many landlords in markets around the country are in the same situation. And that is because the supply-demand dynamic has changed.

New rental data from Trade Me shows residential listings nationwide were up 40% year-on-year in January, while demand was down 23% over the same period.

It had rental stock in the Auckland and Wellington regions up 42% and 39% respectively from January last year, while demand was down 24% and 23%.

Canterbury’s rental stock was up 42%, and demand in the region was down 30%.

Recent rental price data from Trade Me indicated rents have largely remained flat in most areas, but Ambrose estimated landlords were dropping rents by about 20% on average in order to secure tenants.

There are fewer students looking for rental properties in Wellington this year, landlord Peter Ambrose says.

Ambrose, who is president of the Wellington Property Investors Association, has been in the business for more than 23 years. He said the market was proving extremely difficult this year.

“On Trade Me, there are about 1500 properties for rent in Wellington city, and about 950 for sale, so there is no supply issue. It is a lack of demand issue.

“There are less students looking for rentals, and many are going to further-out suburbs or even the Hutt because for the same price they can get a bigger house. That’s compounded by the public sector cuts.”

Traditionally, there was a lack of student flats, but that had changed, and landlords, especially ones with larger properties, were finding it hard to get tenants, he said.

“I’m struggling with one of mine. It is a six-bedroom home, recently renovated and fully healthy home compliant, in the Aro Valley. In the past it’s been snapped up, but not this year, and I’ve dropped the rent by 20%.

“Even one of my properties which is right across the road from the university took quite a while to rent, although it has been now.”

Many Wellington landlords have had to reduce their rents for new tenancies by about 20%, Ambrose says.

The quiet sales market meant properties were being taken off the market, and put up for rent instead, and that had led to an increase in stock and much more choice for tenants, he said.

“That’s great for tenants, but it’s hard to work out what is going to get snapped up, and what isn’t.

“For example, I have a rental property on the same street as one owned by a friend, and they are similar properties. My property was rented in two days, although I did reduce the rent by $70, but my friend reduced his rent by $150 and he still hasn’t rented it.”

Harcourts Reforma Property Management owner Paul Weeks said there was an abundance of properties up for rent in Auckland, and it was affecting on rents.

His company manages 1200 properties spread across the area from Central Auckland through to Pokeno to the south of Auckland, and among them were 44 available listings.

That figure was up 26% from the same time last year, he said.

“The increase is due to people relocating to other places, like Australia, but choosing to rent rather than sell, a lot of new builds coming on to the market, and also some long-term tenancies ending.

An abundance of listings means landlords have to pivot in their rent expectations, Harcourts Reforma’s Paul Weeks says.

“It's all about supply and demand right? If there's an abundance of listings, rental prices have to pivot. But it does depend on where a property is, and the type, size, condition and layout of a property.”

Certain types of properties, including new build terraced homes, attached units and larger houses at the upper end of rental price, were more affected by the situation than standalone homes with something unique to offer, he said.

“It is necessary to manage landlords' expectations around whether a property can be let at market rent, or whether it needs to be rented slightly under, and they do need to pivot.

“For example, we had a big block in Ellerslie where some fixed tenancies came to an end and the tenants moved, and when we remarketed that property, we had to rent at around $60 to $80 under the previous rent.”

But every week a landlord missed out on rent, they were missing out on 2% of their annual income, Weeks said.

“They need to be smart around the pricing and how a property is pitched once it is available for rent because the reality facing landlords has changed.

“And I don’t see the situation changing in the foreseeable future, as there are still a lot of new properties becoming available.”

Some regional markets have also seen big increases in rental stock, Property Brokers’ David Faulkner says.

Property Brokers general manager of property management David Faulkner said while the rise in rental stock was most evident in Auckland and Wellington, some regions had also seen big increases.

Trade Me’s latest data showed Hawke’s Bay had a 59% year-on-year increase in listings in January, compared with the same time last year, and a 4% drop in traffic on the website, he said.

“In Gisborne it’s even worse, with a 300% increase in rental listings over the same period. The region had 49 new listings on Trade Me in January, compared to about 10 last year.

“It’s being caused by a slowdown in the economy and rising unemployment, which means less people moving, but also properties that would normally be sold are being rented out while people wait for the sales market to improve.”

There might be some truth to the idea that high numbers of people heading overseas had made the tenant pool smaller, but mainly there was just much more stock on the market, he said.

“It is leading to cooler rents, but having rents go up 10% per annum year after year is unsustainable.

“Sure, it’s great if you're a landlord, but for the good of New Zealand you want more balanced growth in rents, and that was not happening in recent years.”

Faulkner said the South Island had not been impacted as much as the North Island, and that in places such as the West Coast, Otago, and Southland rents were still going up in line with inflation.

“Once interest rates come off further, and the real estate market improves the balance may change. Although when construction picks up and more new stock comes on to the market that may put downward pressure on rents.”