No growth in residential rents for the last nine months - summer will be a big test for the rental market

Property / news

Rents and the number of rental properties being tenanted are both as flat as a pancake

9th Dec 24, 10:40am by Greg Ninness

Residential rents remained remarkably flat in October, with the national median rent stuck on $600 a week for nine consecutive months, according to the latest bond data from Tenancy Services.

The national median rent first hit $600 a week in December last year, briefly popped up to $608 a week in January this year before dropping back to $600 in February, where it has remained ever since.

In Auckland, the country's largest rental market, the median rent has settled at $650 a week since July, which has put it back where it was in September last year after briefly hitting a high of $670 in May this year.

Although regional rent figures can be a bit more lumpy from month to month, the differences have tended to be small and there has been little if any rental growth around the country for most of this year.

The number of properties being newly tenanted is also flat, with Tenancy Services receiving 11,019 new bonds in October this year, barely changed from the 10,986 it received in October last year.

The fact that the number of properties being tenanted and rents being achieved for them are both relatively stable suggests a healthy balance between supply and demand for rental properties.

However, landlords have probably struggled to achieve much in the way of rental growth so far this year, although tenants would be welcoming some rental stability.

But the big test of the market is coming up over the next few months, with December through to March usually the busiest months of the year for new tenancies.

This is when any imbalances in the market, either in supply or demand, are most likely to manifest themselves in movement in rents.

Anecdotally, interest.co.nz is hearing whispers of rising vacancy levels and increasing difficulties finding suitable tenants from property managers.

If that continues through summer, then the current period of rental stability could turn into a period of rental decline, but we will have to wait and see where things go over Christmas/new year.

A more detailed quarterly analysis of quarterly movements in rents and indicative rental yields on rental properties is available here.

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52 Comments

by Crazy Horse | 9th Dec 24, 11:04am 1733695455

I've said now for well over a decade, that in Auckland at least, the gross return is absolutely pathetic for a new residential property investor.

The business model was always completely reliant on "endless capital gains"

Then so many clueless landlords just thought, no matter how the economy was doing, they will just keep raising rents - well, that "gravy train" has definitely pulled up at the station.

So now, as I've crowed on about here for years - the true winners are the banksters (and a few established property investors and their "vested interest" hangers on)

What a way to run an economy - pathetic, short sighted and greedy.

PS I already know of a young family heading back overseas - only for the one pure reason of their high rent.

by huttman | 9th Dec 24, 11:10am 1733695853

the grass is not exactly greener next door. NZ residential market, rent or buy, has gone back to normal. this means a good time to invest in it actually.

by ChrisOfNoFame | 9th Dec 24, 11:41am 1733697685

So 'normal' in your book is flat rents?

by OldSkoolEconomics | 9th Dec 24, 11:46am 1733697999

i reckon rents are as high as they can possibly go in NZ. Unemployment is rising, house prices arent growing any more, immigration is down. Government isnt spending and private business is in defensive mode.

Something needs to change - or we are locked into a slow downwad spiral. My money is on the govt having to throw some money into infrastructure

by huttman | 9th Dec 24, 11:54am 1733698452

normal means rents vs income is more affordable.

think about it, rents flats, house prices dropped, but income has increased.

I did a calculation the other day, and the value of my house has gone back to 2018 levels after adjusted with CPI.

by Crazy Horse | 9th Dec 24, 12:35pm 1733700923

Do you landlords EVER do any thinking on what so many of you fail to realise ...the govt is trying to "tighten their belt" so what would happen if they had to decrease the accommodation supplement (or taxpayer funds)? for that Clendon sh*tbox with a rotten floor (yes, they are out there)

by Redcastle | 9th Dec 24, 1:07pm 1733702837

If my lovely tenants couldn't pay the rent, then, sadly, they'd have the tenancy terminated.

That said, I can add to the anecdotal information referred to in the report; I haven't increased my rents this year (I usually increase them to cover rises in rates and insurance premiums) because my rents are probably at the maximums for the market for comparable properties in their areas. Hitherto my rent review policy has put my rents below the market to recognise the value I place on not having high-turnover.

One of my rentals came vacant a few weeks ago and I was advised to lower my rental expectations (i.e. charge less than what the outgoing people had paid). I was prepared to do that, but I ended up selling instead.

by huttman | 9th Dec 24, 1:12pm 1733703139

my tenants are lovely and really looking after the property. I haven't raised the rent in the past 3 years, even though rates has doubled, insurance 60% up, and I have to fix the roof for about 8k.

I feel sad some people keep landlord bashing as if landlords are the problems.

by pigeonbox | 9th Dec 24, 5:24pm 1733718258

A lot of them are the problems.

by Murray Falconer | 9th Dec 24, 1:21pm 1733703672

I haven't increased my rents...because my rents are probably at the maximums for the market

Wow, another honest landlord that also understands rents are not driven by costs!

Of course, if any of you watched commenter 'Kate' present her rental reduction plan to MP's they were all worried about the landlord 'costs' in relation to rent...beyond useless.

by Redcastle | 9th Dec 24, 3:52pm 1733712731

I'm not familiar with Kate's rental reduction plan - please point me in the right direction.

I must take issue with you presuming my rents aren't driven by costs; on the contrary - direct costs have a strong bearing when I review my rents.

To explain; my rent review policy involves passing on increases in unavoidable costs (rates and insurances) without 'looking over the fence' to see what market rents are. Over time this approach has resulted in my rentals being less than the market for existing tenants and I 'catch up' when I get a new tenant. Good tenants get the benefit of a more modest increase in rents and their rents will, generally, be lower than comparable properties in the area.

However, this year I've found my rents are now at top of the range for comparable properties. As they were previously below the market and I haven't increased them, ergo the market has declined.

by The Man3 | 9th Dec 24, 4:19pm 1733714374

Redcastle, where are you based as rents are definitely increasing in ChCh.

There are a lot of new 2 bedroom townhouses bring rented out which probably make it look like rents are not increasing!

The loss to rental deductibility of interest introduced by Robertson has done people that rent, no favour's and if ever introduced again there are going to be that many that will not get rental accommodation.

by agnostium | 9th Dec 24, 5:55pm 1733720114

The Man always gets better than the market, especially in CHCH which is the new Riverhead.

by HouseMouse | 9th Dec 24, 8:45pm 1733730315

Remember, it’s The Man THREE. I wonder if he consults with his alter egos, The Man1 and The Man2, each time he comments.

by Redcastle | 10th Dec 24, 11:08am 1733782138

Wellington and Porirua

by Murray Falconer | 9th Dec 24, 7:29pm 1733725764

Hi Redcastle,

This is the proposal, basically it ties rents to a percentage of property value, haven't put my finger on the presentation to MP's sorry (I guess it was a select committee hearing but not sure): Affordable rents - a formula approach to regulation | interest.co.nz

I must take issue with you presuming my rents aren't driven by costs

I spoke too soon obviously! Whether or not you realise it, you are clearly setting rents based on what the market will bear. Cost increases are just what you tell yourself to feel okay about increasing the rent since in your example you have not passed on the cost increase (i.e. market rate trumps cost). In Auckland there have been decades of rental growth in lockstep with population growth generated demand. Yes, costs have risen too, but the relationship isn't causal. For example, if there is only one tenant and four identical properties for rent, your costs are irrelevant in securing the tenant. Note, I'm not saying costs of home ownership aren't a factor e.g. a tenant won't expect to rent a house for $1 as even if they owned a house the rates etc would cost more - so there is a lower bound where costs are a consideration for how much the rent might be.

Your method of underpricing for quality tenants is astute and as good as one may hope for.

Regards,

Murray

by Redcastle | 10th Dec 24, 11:41am 1733784065

Thanks Murray. The Greens are big fans of rent controls, despite the research and experience that show how damaging they are.

It's hard to beat the market, even without the prospect of a claim being lodged with the TT, so I take a pragmatic approach. Personally, I've never been inclined to squeeze my tenants for the last dollar; it's basically bad business if you value return / happy customers and recognise there's a very real cost in turnover of tenants.

We could argue the finer points of what's causal; but your hypothetical example doesn't really hold up. The principal of rivalness comes into play when there are multiple tenants chasing one property. They won't all be equal so I can be quite discriminating; for example, I can lawfully discriminate to exclude smokers, I can take reasonable steps to be satisfied they are able to meet their commitments and reference checks as to their character. But after a deal is made, your example is no longer valid. When it comes to annual rent reviews there aren't that many options; do nothing, or increase in line with the market or review your costs. No one likes their rent going up, but my approach is transparent as to the drivers.

Wrt managing costs, I take the (arguably) simplistic approach that rates and insurance are costs that my tenants would have to wear if they owned the place, so use that as my starting point when reviewing rents. In my own way I'm quietly prompting my tenants to take an interest in what their Council is doing that will flow through to the rates on the property.

But I don't subscribe to factoring in interest costs in rent-review calcs. That approach runs into a wall if there is no debt, so I take the view that my tenants are renting my capital, and my capital servicing costs are not their concern. If interest costs rise, that's my burden and if interest falls, that's my gain and I hedge that risk.

At one point I factored in the previous Government's tax surcharge when I did an earlier rent review, but I didn't bother repeating that when it was clear interest deductibility was being restored.

In short, you could say I have a a more thorough rationale to my rent reviews than just looking over the fence at what my neighbouring LL might be charging. And it's worked very well for me and my tenants

by huttman | 9th Dec 24, 1:09pm 1733702950

I don't know. we 'Landlords' are happy to be double headed monsters as is.

by kiwimummma | 9th Dec 24, 3:09pm 1733710165

Accommodation supplement was only ever a supplement for private landlords - holding up the bottom end of the rental market thus holding up the bottom end of the property market. I wonder if there has been any modelling as to what would happen if the accommodation supplement was stopped?

by J.C. | 9th Dec 24, 3:35pm 1733711714

Accommodation supplement was only ever a supplement for private landlords - holding up the bottom end of the rental market thus holding up the bottom end of the property market

Handouts are a prop for the Ponzi. Specuvestors are marginal buyers as well. Remove those marginal buyers and price / value distribution goes tits up.

by TheGhost | 10th Dec 24, 7:33am 1733769232

Which is the part of the calculation many kiwis (and indeed many in the west) fail to see.

Our currency has been debased through covid era money printing and inflation.

$100 in Q1 2020, is now $121 in Q3 2024.

by kiwikidsnz | 9th Dec 24, 12:33pm 1733700783

Investors are seeking a long term inflation adjusted income stream funded by their business.

Speculators are not investors.

by Murray Falconer | 9th Dec 24, 1:33pm 1733704426

While I agree with everything you said, I don't think this is cause for celebration in the same way I don't celebrate when median/HPI whatever yard stick you like for house prices decreases.

This is because all the wrong setting are all still largely in place for rents and property prices to take off again should the immigration and interest rates levers be pulled hard enough.

I don't only want lower rents and house prices in recessions, I want them in the good times too.

When the accommodation supplement can't be claimed by anyone because rents are too low, then I might celebrate as a significant change must have taken place.

by Averageman | 9th Dec 24, 11:09am 1733695780

Lack of "suitable" tenants....

The future homegrown rent slaves are waving goodby and exiting west. Immigrants have finally wised up that there is not much here except the thumb of their speculord waiting to press down on their back. Perhaps they can try KO tenant contracts as increasingly that's what left. Add in the Aussies keep deporting future renters our way.

You have done it to yourselves,

by Redcastle | 9th Dec 24, 1:12pm 1733703172

Are you a LL or have you ever been one?

Like it or not, it involves, capital, risk and the reasonable expectation of a return on the investment. If you own your home, you'll know that property owners have faced massive increases in rates and insurance premiums and even simple reactive repairs and maintenance can be costly. Those costs get passed on, just like supermarkets pass on inventory price increases.

by WestieAJ | 9th Dec 24, 2:02pm 1733706175

There are 2 supermarket chains and 120,000 landlords. Brutal economics.

by J.C. | 9th Dec 24, 3:36pm 1733711768

There are 2 supermarket chains and 120,000 landlords. Brutal economics.

Wonderfully illustrated Westie

by Redcastle | 9th Dec 24, 4:11pm 1733713919

Nah, it doesn't deal with the reality that when businesses face cost increases, they pass them on where they can.

If they can't pass them on; they absorb the cost increases and look for internal efficiencies.

When costs exceed revenue, businesses adapt or fail. The only exception to this rule are businesses owned by the state.

by J.C. | 9th Dec 24, 4:40pm 1733715636

Nah, it doesn't deal with the reality that when businesses face cost increases, they pass them on where they can.

In perfect market competition, you can't pass costs to the consumers. Case in point: Japan grocery retail.

by CN - new | 9th Dec 24, 7:41pm 1733726515

Nah, it doesn't deal with the reality that when businesses face cost increases, they pass them on where they can.

If they can't pass them on; they absorb the cost increases and look for internal efficiencies.

What are the internal efficiencies for landlords in the long term rental market?

The largest costs (interest, rates, insurance) are outside the control of the non owner occupied owner.

Cheaper interest rate from another lender?

Cheaper insurance from another provider?

No movement on council rates as the non owner occupier owners is essentially a price taker from the local council (monopoly).

by Redcastle | 10th Dec 24, 11:44am 1733784252

Agree - LLs don't have many options c/w many other businesses (which my general comments were related to.

by Ocelot | 9th Dec 24, 2:22pm 1733707346

Choose one of either "risk" or "expectation of return on investment". Many recent investors are getting absolutely ploughed. And fair enough. Gambled on being able to exploit the productive wage slaves on an ever increasing upwards spiral, and have now come a cropper, holding onto or dropping some falling knives, while shouldering huge amounts of debt and interest. Couldn't happen to a nicer bunch. Rent seeking needs to be punished rather than rewarded. Bring back land tax, and use it to reduce GST and income tax, and we'd swing back round to homeownership being far more common again. People would have a vested interest in their community again.

by Redcastle | 9th Dec 24, 4:07pm 1733713636

Comments like 'choose one of either' makes no sense. Life is complex, so I'm not limited to 'a one or the other' dichotomy. I'll pursue a return on my capital in multiple forms AND manage the associated risks as best as I can.

by Averageman | 9th Dec 24, 2:44pm 1733708699

Indeed. Both personally and professionally, and still do so on a small commercial scale.

All those things are good business statements. Costs cost costs - agree its important to manage such in business. Then why pay so much, and have so much debt if it doesn't stack up or you have no buffer? Why indeed, Greed is the answer you are looking for. My issue is the model of stacking excessive debt to reduce personal income tax (now ring fenced), and scale of the tax free gains on sale. They are so one sided they are driving the greedy risk taker to own houses at any cost.

This push's price past where joe public's incomes can possibly support it. This is leading to an exodus of future tax payers offshore. After an early lifetimes investment from the taxpayer in their healthcare, dental, education this is a horrible outcome. It is also lead to the tax payer having to top up incomes to the tune of $2.34 billion every year to pay "my lords" debt demand via accommodation supplement. If the tax payer was a business, it would be the stupidest business model ever. Unless you are the bank..... laughing all the way to their shareholders pockets.

I am well informed that the Govt has consultants working on a capital gains tax options. Cant help but wonder if the business of land lording had to pay appropriate tax, how many throw their hands and just sell, or, just pay less for the asset.......

by Redcastle | 9th Dec 24, 4:02pm 1733713373

I don't have a lot of debt, so your assumption is false.

People aren't leaving NZ because of rents; they leave for many reasons; career opportunities and the prospect of earning more will be a far greater lure than how much rent they pay.

Go right ahead and lobby for the accommodation supplement to be cut. But just like your misguided view that people leave the country because of rents; why are you focusing on just one form of income support? I'd be a huge fan of slashing the welfare system.

by agnostium | 9th Dec 24, 6:00pm 1733720403

People aren't leaving NZ because of rents; they leave for many reasons; career opportunities and the prospect of earning more will be a far greater lure than how much rent they pay.

Yes they are because how much money they take home = wages-rent (among other costs)

by interesting1234 | 10th Dec 24, 9:47am 1733777236

Yep, the options are either earn _____% more to counteract rent increases and cost of living, or, move over to Oz and get 30-50% more money instantly so you have the ability to actually save something for your future instead of it lining the pockets of your landlord. Add in the extra stress and time taken form getting another job that pays enough more to counteract the aformentioned increases, the time it takes you away from your family and the impact in your lifestyle, and it is very easy to see why so many are crossing the ditch. More money for the same work and a better long term opportunity to invest in your future with the extra disposable income.

by CN - new | 9th Dec 24, 7:44pm 1733726648

Are you a LL or have you ever been one?

Like it or not, it involves, capital, risk and the reasonable expectation of a return on the investment

Here's what most recent non owner occupiers buyers didn’t see. They were buying an investment with return free risk.

by Thats All Folks | 9th Dec 24, 11:23am 1733696599

I wIlL jUST rAiSE tHE rEnT.

Watching this burn is rather satisfying I must admit.

A welcome return to fundamentals in progress.

by Yvil | 9th Dec 24, 11:34am 1733697243

"I wIlL jUST rAiSE tHE rEnT."

What's with the caps/lower case ?

by Averageman | 9th Dec 24, 2:46pm 1733708797

Makes you focus to see if you missed something. Worked.

by Nzdan | 9th Dec 24, 12:36pm 1733701011

It's just to exaggerate a whiny tone.

by Murray Falconer | 9th Dec 24, 1:24pm 1733703864

It seems fitting that a nonsense statement be typed in a nonsensical way.

by Yvil | 9th Dec 24, 1:39pm 1733704746

Haha, well said !

by Chaosinflesh | 9th Dec 24, 1:03pm 1733702617

You forgot:

My REnts aRe bELow MARket rAteS.

by Thats All Folks | 9th Dec 24, 4:05pm 1733713540

Ah yes another classic from the Greatest Hits collection!

by Yvil | 9th Dec 24, 11:33am 1733697188

Another headwind for landlords. They will be desperate for lower interest rates.

by GuineaPig | 9th Dec 24, 12:20pm 1733700004

Just extended an 18m lease for another 18m, no increase. Great tenants and another $20 - $25 isn't going to make any difference to me.

by The Man3 | 9th Dec 24, 1:40pm 1733704806

Interesting.

we are having no problem putting ours up by a reasonable amount .

not one tenant has questioned the increase.

We are hands on landlords that offer a great product at a price we consider fair.

by GuineaPig | 9th Dec 24, 3:17pm 1733710679

That description would fit us also. We are based in Lower Hutt and if I search for comparable listings there's plenty on the market, I'd sooner lock in good tenants than do that dance.

by agnostium | 9th Dec 24, 6:03pm 1733720634

The man doesn't like people suggesting anything that might make property investment look remotely unnattractive, such as lower rents, that's why he's questioning you.

by Bully Hayes | 10th Dec 24, 11:26am 1733783204

We have just added $50pw to the rent on one of our places - Freemans Bay, Akld. Had been fixed for the 24mths prior - so amounted to a compounded 2% increase. Is possibly still a touch under priced compared to similar places in the area, and like to think that we're looking after the place really well for the tenants