Median rents up $50 a week over last 12 months in parts of Auckland; Rents continuing to increase sharply when supply is also increasing suggests supply is still falling well short of demand

Photo: Steven Damron

By Greg Ninness

Median rents have increased by $50 a week a week in parts of Auckland over the last 12 months, according to the latest housing bond data collected by Tenancy Services.

Across the entire country the median rent for new tenancies completed in March was $400 a week, up by $20, or 5.3%, a week compared to March 2016.

But rent increases were considerably higher in much of the upper North Island and Wellington and more modest in the rest of the country, with median rents in Christchurch continuing to decline.

The table below shows the median rents in the month of March for the last three years in main centres around the country, with sharp jumps recorded over the last 12 months in many places.

In Auckland, the biggest increases were in Rodney and Manukau, which were both up $50 a week in March compared to 12 months earlier, followed by Waitakere and Franklin, which were both up by $30 a week, North Shore +$15, and Central Auckland and Papakura +$10.

There were also substantial increases in Hamilton where the median rent was up $30 a week compared to a year earlier, and Tauranga +$43.

Wellington rents were also up substantially, with the median rent in March increasing by between $30 a week in Wellington City to $45 a week in Upper Hutt.

Substantial increases were also posted in Napier (+$40) and Queenstown-Lakes (+$30).

Christchurch went against the trend and median rents there have been slowly dropping for the last two years and in March were down $10 a week compared to a year earlier, and down $20 a week compared to two years earlier.

The interactive graph below plots the monthly changes in median rents for two bedroom flats and three bedroom houses in Auckland’s central suburbs (suburbs within the former Auckland City Council boundaries) and in Wellington City and Christchurch.

It shows that the median rents for three bedroom houses in Christchurch peaked at $450 a week in the period from February 2014 to June 2015 and have since declined $30, or 6.7%, to $420 a week.

In Wellington City the median rents for three bedrooms houses has risen steadily since May last year, peaking at $572 a week in February this year then dropping back by just $2 a week to $570 in March.

In Central Auckland the median rent for a three bedroom house has been steadily trending up for several years and peaked at $630 a week in February, before dropping back to $615 a week in March.

Demand increases

The sharp increase in rents in many parts of the country also corresponds with a jump in new letting activity.

Tenancy Services received 15,379 tenancy bonds from around the country in March this year, up 8.3% compared to March last year and up 11.3% compared to March 2015.

That reflects an increase in demand for rental properties as more people are priced out of home ownership by high housing prices and the growing demand for rental housing as a result of increasing levels of net inward migration.

On the supply side, the surge in investor activity that has been evident for the last several years has seen an increase in the supply of rental properties as investors have taken an increasing share of the market from owner-occupiers.

However that fact that rents are continuing to increase so sharply when the supply of rental properties is also increasing suggests that supply is still falling well short of demand.

Rents - median

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weekly median
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weekly median 3 br house
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weekly median 2 br flat
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weekly median 2 br flat
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46 Comments

So we are prospering......as per national logic.

Are we really prospering , or is it just an illusion.

My take is that things are just as easy or hard as they were a decade ago, depending on your view of the world and your personal LOCUS OF CONTROL ( Google it , its an interesting concept ) .

We are importing 1000 new migrants every 5 days , they have to live somewhere , so of course rents are going to spike .

Its got more to do with supply and demand in the event of an increase in demand than any actual tangible prosperity

on the subject of control locii, there's an interesting correlation between those with an internal control locus and the political right wing. the issue there, is that some studies suggest individuals with a high internal control locus are more likely to reject advice, medical treatment, and suffer more negative cognitive dissonances when their own beliefs, ideals and facts are challenged.

Beer in the viaduct is 11 bucks a bottle. At my old local 8 bucks. We have gone backwards.

So its cheaper to rent in Central Auckland than in Manukau. And only a bit more expensive to rent on the shore than Manukau. This doesn't seem to align at all with house price differences. Any chance this is a result of accommodation supplements pushing up rents in Manukau?

Without really knowing Auckland myself, I'd hazard a guess that the median rental in Central Auckland is a small apartment while you might get more for your money in Manukau

Prices static rents up.yields to go up.good buying in a year or two.

But interest rates also up in a year or two....
Will be interesting to see what effect the immigration changes have on wage inflation
I imagine it will be small but not negligible

Plenty of rentals being built in Hamilton.
25 years ago on Massey Street by the Frankton School there were about 12 houses catering for Railway employees and their families.
Now in there place are approx 50/60 apartments the majority of them rentals and still the building goes on.

Yeah but Hamilton's grown in population in those 25 years too.I had a unit up for rent as my tennant had bought his first home.my property manager told me she showed eight people through in two days.got a great new tennant.she's got zero vacancies on her books

Supply and demand once again! The focus is shifting from people buying to people renting, if you can't afford to buy now or simply choose not to, then renting is the only option, with high net migration and housing shortages, rents will increase to the high numbers that mortgages now take out of home owners pockets.
I'm really interested to see what the election brings in the way of treating the shortage of housing stock that the council/govt has created over the past 10-15 years. It's beyond me to think that past councils and govts have not really taken into account their growth factors and created more housing earlier in the piece. New Zealand has always been a "repair it after that fact" kinda place. Rent or Buy, either way you will be paying through the teeth until they can sort the underlying issue of Supply and Demand!

http://thespinoff.co.nz/media/20-04-2017/how-to-buy-your-first-house-a-d...

Interesting link to some of the recent stories in the NZ Herald & Stuff...

Chickens are coming home to Roost. Cheers National !!

One of the upsides of having a runaway housing market is run away rents eventually...

Time for Change. Vote Change. Vote Labour
Time to tackle Demand and Encourage supply.
"Under our policy only citizens and permanent residents will be able to buy existing homes. The ban will also apply to foreign trusts and foreign corporations. "

I have just checked the Labour website because it changes very often , its remains vague on detail and says nothing about how we are going to pay for the wishlist .

I also dont know how to ban foreign investors , its a big thing to do that , and would require a fundamental law change that Labour may not wish to undertake .

You refer to "tackle demand " for housing what exactly do they mean ? .......... when you import 1000 new migrants very 5 days , and they all need a roof and shelter ..........what do you think it will do to demand ?

Labour is at least promising to do something about those thousands of new migrants:
"The commitment I am making is we have to be serious about it, we have to cut immigration. It has got to be in the order of tens of thousands," Little said.
Promises are of course worth the paper they're printed on, but at least it's a kind of recognition of the problem (at last).

Tackle demand by banning foreign buyers
This would ban the following groups from buying existing properties:
- Foreign Students
- Foreign Temp Visa Workers
- Off-Shore Foreign Buyers
- Companies & Trusts with Foreign owners / beneficiaries

Well, I have no idea if we are representative, although I certainly have friends with the same rational.... We have decided to rent rather than buy because we believe that the housing market has peaked and is unsustainably inflated in many areas. We would have no problem getting a mortgage. We have enough for a 60-70% deposit on a dream, "forever" type house but just simply are not prepared to put that in NZ housing right now. Our money is working well for us elsewhere at the moment and we have a lovely rental and landlord.

People keep writing "if the market pops it will only drop by 10-20% max" well, on a million dollar house that's both our kids university paid for, family holidays and more besides.

I have a family member with 3.5 million mortgage debt (they are under 30). All properties where the rent received does not cover the interest only mortgage, so they have to top up from their salary. A salary, I might add, that comes from jobs that is in an inherently insecure sector. They have said to me on numerous occasions that they would go under within a month if they lost their job, that they have no savings to cover the mortgages. But they say this flippantly because they are that cock sure that the housing market will never deflate. They say that if needs be, they'd sell a house. (Presumably, just at the same time, that everyone else is also dumping their speculatively purchased properties). They are not an outlying example.

I realise that many landlords wish to claim that they are investors and not speculators but every college up and down the country is running courses on "negative gearing" and the easy wealth that can be made in property. I have never seen such obvious symptoms of a bubble. So whilst many are caught up in the "irrational exuberance" an increasing number of people are deciding to rent and wait the crisis out. Sure rents will go up some to reflect this in the shorter term. But i'll take $30 a week extra rent over what I stand to gain if the bubble bursts.

Why does this article assume that rental demand is increasing because we all can't afford to buy? There are lots of us, who are simply refusing to inflate this bubble any further.

There is nothing wrong with renting...have never lived in a house I owned.

There is nothing wrong with renting , but you had better vote for a party that curbs migration if you want to avoid a long term poverty trap .

Because the current set-up is not going to do anything to curb rent increases

We can buy any time so no personal risk of poverty trap for us, although that is a risk for some. Any market involves an element of risk. Personally, I don't believe that migration is the only factor in the housing bubble. When our tenancy is up in 2 years, we will reevaluate though.

We're in the same position as you gingerninja. We could easily buy but are not wanting to play the game in its current state given all the variables.

Sorry but your family member is a fool. Yes I own houses but I have bought them over the last 20 years, I'm geared at 35% and I rent the houses long term to tenants I have a great relationship with. People like your family member who over-extend themselves are fools (he is young in his defense and he will have time to recover after going bust) but I believe these kind of "investors" who are really speculators give a bad name to long-term investors.

Yvil - don't worry about that, you give yourself a bad name having bought houses that others could have turned into 'homes'.

The story NZ landlords tell themselves about being 'good' and providing a service to society, is certainly an alternative fact.

The bubble = population?

Rents climbing is landlords trying to make their investment worthwhile now that cap gains have halted in Auckland. With that kind of jump, people that were already on the cusp of giving up on Auckland will be leaving a lot faster. This will be a short term jump as people take a while to leave, and as other skilled workers leave, I'm going to be increasing prices for my trade work as there's less competition. Higher rents mean higher labour costs. I'm lucky in that I'm a single male who's got a lot of contacts so I can avoid getting hurt by rents.

So with record migration into Auckland apparently, Central Auckland rents y/y rose at less than the rate of annual inflation.

I see on TradeMe there are over 600 apartments currently advertised for rent in Central Auckland. Looks like that area is still quite challenging to find tenants despite record migration.

Zachary, what is your gut telling you .Listings sale/rent relatively stable at present, maybe a few sitting in the wings Lull before the storm, or a following wind , to propel prices to another level.

Cowpat, to tell the truth I am always a little pessimistic about things yet around where I live houses are selling and tenants are queuing up for anything that is reasonably priced. Everything appears to be very normal. I renewed a mortgage today for .85% less than I was previously paying and I could even put the rent up as well although I wont.

Fair comment Zach. I guess in the end it comes down to what is a 'reasonable price' and hence the debate on what may or may not eventuate. '

I get the impression that a lot of folk are like those old timers who are still thinking in yesterday's money. Wot, five dollars for that? It should only be 50 cents! Some households are bringing in $2500 a week and paying $700 a week in rent.

For rental returns and capital gain (in combination) for residential property, Wellington and Auckland are well out in front.

But, unsurprisingly, a few provincial cities do well also - notably Palmerston North with its young population demographic. Plenty of students and staff from Massey seek rental accommodation - plus people working at Linton (army) and Ohakea (air force).

Landlords typically do very nicely in PN.

Buying in Auckland has become an investors game? At this stage, Hamilton is a better buy for first home buyers I reckon.

Six month ago you could look on realestate.co.nz and there was almost nothing for sale in the St Heliers Kohimarama Region (that’s where I lived so I know that market well, and it was white -hot back in June 2016). Contrary to the Herald spin, it’s a totally different story now. A quick look on realestate..co.nz shows dozens of houses for sale in that area, many by negotiation for 1.2 – 1.5 million – (theoretical y/y losses are probably 300K+)

Of course many of the buyers had been Chinese and they left the houses empty. A good example was 102 Kohimarama road, a multimillion dollar home left derelict for years. I sold a tiny box last year and was told by the agent that I would have got more had it not been tenanted because Chinese buyers prefer to buy empty houses.

They’re just my observations on the behavioral dynamics of the marginal buyers. It seems that if houses are taking longer to sell then vacancy rates will increase irrespective of the rental demand for the abovementioned reasons.

One final thought – zerohedge just released this report showing that capital controls in China were being relaxed.

Lots of reports on China and capital controls

https://www.ft.com/content/519b02cc-24e6-11e7-8691-d5f7e0cd0a16

That's a paid subscription link, what's the gist of it?

Oh? They usually let you read one article a day for free. Basically, similar to zero hedge but more concrete detail.

"Sources told Reuters on Wednesday that China's central bank has relaxed some of the curbs on cross-border capital outflows, the first signs of easing of measures put in place last year as authorities and financial markets feel more confident that pressure on the yuan has eased."

http://www.reuters.com/article/us-china-economy-idUSKBN17M086

Gingerninja, if you have a 60 to 70 per cent deposit saved on a dream house, that would tend to say that you have approx. $600,000 plus saved?

You obviously have had a substantial amount for many years and yet you still rent?

Doesn't really seem logical to me that with that sort of money available in cash that you never purchased a home years ago, where niow you would be so much better off financially!

You could have bought several properties by leveraging and I would say you would be able to live off your rental returns!

If you have been not prepared to buy due to thinking that prices were too dear then you have made very poor financial decisions.

He may also have had those funds in ETFs / index funds since the financial crisis, in which case he probably saved considerably less than that and accumulated a good amount in the growth of those investments. he probably hasn't done too badly overall.

Man2 have only recently returned to NZ. Our investments remain overseas currently where returns are currently very good. Won't put our capital in the NZ property market just now because it looks too much like a bubble. But back in NZ to stay, kids are in NZ schools now and very happy, having family close by is also priceless, so will definitely buy an NZ house at some point.
Just not in a hurry, whether houses peak and then plateau or whether they crash, we've decided to wait.

'Normal people' cant afford to buy the house - to make it family home. Only multiple property owners can. And they rent it out. Normal people need to live somewhere and will be renting. It is very, very sad but it is set to increase. Only economic slowdown that make people impossible to pay the high rent may change it.

The rents are ridiculous in Auckland and NZ....

Only a rebalancing of property back toward homes instead of investments can really achieve reasonable housing outcomes. It's patently unfair for those who benefited from previous government builds, housing corp loans, cheap govt. leasehold land and other policies aimed at fostering affordable home ownership (these worked!) to then be benefiting from these as investments rather than passing reasonable housing outcomes on to the next generations. It massively selfish and shows a lack of respect for the hard work of previous generations of NZers.

Those are the political outcomes young NZers need to be pushing for.

Nice of you to think of what is "unfair" in your opinion

Your brain is confused Yvil - so I apologise on your behalf because many others in this country are in the same boat as you. It's not your fault, its just that you've been given (and taken) too much, too easily and confuse that for a good way of being. Perhaps you could try to see the world through a more well balanced and thought out paradigm - where the welfare of others comes as a priority over the size of your 'property portfolio'?

Maybe I am, maybe not. I grew up from a working family and I was given nothing. I also know that only now that I'm doing well I can employ others, i.e. providing work & income for others and donate to charities