Rental growth strong in Wellington, Queenstown, Rotorua, Napier and Whanganui, but weak in Auckland and Christchurch

Photo: Alpha Stock Images - http://alphastockimages.com/

By Greg Ninness

Housing rents have been rising much more slowly in Auckland than the national average has been rising, with rents declining in parts of the city over the winter months.

Interest.co.nz’s latest analysis of rental bond data shows that the average rent paid for all new tenancies throughout the country, that were reported to Tenancy Services in the September Quarter this year, was $444 a week.

That’s up 5.0% from the September Quarter of last year, and up 10.3% from the same period of 2016.It means tenants throughout the country are paying an average $21 more in rent each week than they were a year ago, and $41 a week more than they were two years ago.

It also suggests that nationally, rents have been increasing at a fairly steady rate for the last two years, however there are significant regional differences.

In Auckland, the average rent was $538 a week in the September Quarter this year, an increase of $17 a week (3.2%) compared to the third quarter 2017, and up $38 a week (7.5%) compared to the third quarter 2016.

That means rents in Auckland are increasing at a slower rate than the national average, both in dollar and percentage terms, and suggests rental growth has particularly slowed in the last 12 months compared to the previous 12 months.

However the slowdown in rental growth in Auckland may be more substantial than those figures suggest because interest.co.nz also analyses rents every month on a rolling three month average basis.

That shows the average Auckland rent peaked at $542 a week over the three months to the end of April this year, and then slowly declined to $538 in the three months to the end of September.

Although the size of the falls was modest, it was consistent enough to be a trend.

The only place in the country where the average rent was above $600

However Auckland was not the most expensive place to rent a home. That honour goes to Queenstown-Lakes where the average rent hit a record high of $616 a week in the September Quarter of this year, making it the only place in the country where the average rent was above $600.

And rents in Queenstown are growing much more strongly than the national average, with the September Quarter’s average up 6.3% compared to the same period of last year, and up 15.4% compared to two years ago.

Rental growth has been weakest in Canterbury, with rents in Christchurch being almost flat for the last two years while average rents have actually declined in nearby districts such as Selwyn, Waimakariri and Banks Peninsula (see table below).

Then biggest decline has been in Banks Peninsula where the average rent was $340 in the third quarter of this year, down 10.3% compared to the third quarter of last year.

In percentage terms the biggest increases in the September Quarter compared to a year earlier were in Whanganui +18.2%, Napier +10.8% and Rotorua +10.3%.

Overall rental growth in the Wellington Region also outstripped the national average, with annual growth of 5.8%, although the Kapiti Coast went against the trend and posted annual growth of just 2%.

The table below plots the changes in average third quarter weekly rents in major centres throughout the country from 2016 to 2018.

Average Weekly Rent for New Tenancies Q3 2016 - Q3 2018
  Q3 2016  Q3 2017 Q3 2018 1 Year change 2 year change
Whangarei  334 370 373 0.9% 11.8%
Rodney 515 522 538 2.9% 4.3%
Waitakere 472 494 511 3.5% 8.4%
North Shore 548 569 588 3.3% 7.3%
Auckland 517 538 555 3.1% 7.5%
Manukau  496 511 527 3.1% 6.2%
Papakura  467 489 505 3.3% 8.2%
Franklin 446 460 489 6.3% 9.9%
Auckland Region 500 521 538 3.2% 7.5%
Hamilton  349 370 388 4.7% 11.1%
Tauranga 417 438 447 2.1% 7.3%
Rotorua  300 319 352 10.3% 17.2%
Napier 334 356 394 10.8% 17.9%
Hastings 316 350 381 8.7% 20.4%
New Plymouth  335 339 347 2.2% 3.5%
Palmerston North 294 312 328 5.0% 11.7%
Whanganui  233 236 279 18.2% 19.9%
Kapiti Coast  373 393 400 2.0% 7.3%
Porirua 410 445 466 4.6% 13.5%
Upper Hutt 321 370 403 8.8% 25.4%
Lower Hutt  355 393 427 8.5% 20.3%
Wellington 440 457 485 6.0% 10.1%
Wellington Region 409 435 461 5.8% 12.6%
Ashburton  306 328 328 0.0% 7.1%
Banks Peninsula 363 379 340 -10.3% -6.2%
Christchurch 371 364 371 1.8% 0.1%
Selwyn District 437 438 423 -3.4% -3.1%
Timaru District 288 299 306 2.5% 6.2%
Waimakariri District 389 393 388 -1.1% -0.1%
Canterbury Region 364 362 367 1.3% 0.8%
Nelson  337 342 354 3.5% 5.2%
Queenstown-Lakes 534 580 616 6.3% 15.4%
Dunedin  333 361 384 6.4% 15.4%
Invercargill  239 244 254 3.7% 6.0%
Total NZ 403 423 444 5.0% 10.3%

*This article was first published in our email for paying subscribers early on Monday morning. See here for more details and how to subscribe.

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44 Comments

Wow wow. .. all those that proclaimed there is a housing shortage. .. blah blah blah blah blah blah blah. . BLSH..blah blah blah blah

You don't think there is a housing shortage in Auckland?

There has been a demand issue for years. Not a lack of housing. Although no politician would ever admit to this. My old mate Gareth Morgan mentioned this 3 or so years ago...

There is, but not to the extent that is proclaimed, especially by those that state that is one of the factors that will prevent a housing correction. .

I should have ratified in my first post

There's a shortage of affordable housing yes but not the overall volume.

I'm not sure, but this is from MBIE's briefing to Phil T when he tooK the reins:

Estimates vary as to the magnitude of the resulting housing shortfall in Auckland, and depend
on what assumptions are made about household composition, and lag times between building
consent and building completion. A methodology used by MBIE estimates the accumulated
shortfall in Auckland at around 45,000 dwellings.

Sure but the MBIE is well known for using maths to figure stuff out so you cant take what they seriously.

Indeed Laminar, PP2F's statement of:

"Wow wow. .. all those that proclaimed there is a housing shortage. .. blah blah blah blah blah blah blah. . BLSH..blah blah blah blah"

certainly carries a lot more substance

Appreciate your support; )

Nope! There is a debt issue in Auckland, but no genuine housing shortage.

Christchurch still in the doldrums ah MAN?

It's great news for everyone in Chch except for the landlords.

We're a happy bunch with our increasing disposable incomes

A peculiar situation at present in Auckland with both the inventory of unsold properties rising and the inventory of rentals.
Properties for sale in Auckland 13,262 (Real estate .co.nz) today up from 12,681 on 29th September (4.5% rise)
Properties for rent in Auckland 4,050 (Tradme) today up from 4,013 on the 5th October (1 % rise)
So despite the volume of landlords apparently exiting the market (which I hope explains the 31% Y on Y sales listings increase in September). The number of rentals available is also still rising. Housing shortage? unlikely, it's more likely that there is an issue in the market for tenants finding a landlord who understands maths and hasn't over-leveraged themselves!

This goes to show you how much the media can talk up a situation, or make up a story if you like. All those poor homeless people living on the streets, there must be a housing shortage somewhere, surely? And the Poli's swallow it hook line & sinker, when in actual fact, the real problem is that there is too many poor people who can't afford anything really (including a home), whilst we continue the underwriting of the breeding of such people with our eternal & glorious welfare system. It's hard to solve a situation if you don't want to see where the real problem lies (pun intended). More media crap - present company excluded of course.

It's all a load of bollocks to perpetuate the myth that housing always goes up and that the subsidies to landlords are necessary to 'provide a service'. They aren't, they just magnify the debt/greed issue of the herd. The government should just carry on with building, ignore the bleating of the over-leveraged and look to get a viable alternative for long term tenancies in place, it that means making a profit on kiwibuilds in some areas to subsidise state offerings in other areas then so be it. My snap shot look at Palmerston North last week just shows the extent at which landlords are not in it for the long game, despite their protestations a large portion of current listings in Palmy highlight that a lot are merely taking advatage of tax advantages against personal income and go back on the market as soon as the 2-year capital gains limit has been reached.

11/10/2018 (Nic Johnson)
Palmerston North - A snapshot of a property crash about to hit New Zealand. It's time to call bullshit on this market.
I have just looked at the 175 Listings on Trademe for Palmerston North and uncovered the following:
45 Listings are New Builds or Plots, most that have been built will have been financed for top of market prices. (25.6% of the market)
3 Listings were bought in 2018 and are already back on the market (1.7%)
11 Listings were purchased in 2017 (6.2%)
25 Listings were purchased in 2016 (14.3%)
7 Listings were purchased in 2015 (4%)
8 Listings were purchased in 2014
7 Listings were purchased in 2013
7 Listings were purchased in 2012
8 Listings were purchased in 2010/11
22 Listings were purchased between 2000-2009
6 Listings were purchased between 1990 -1999
5 Listings were purchased pre 1990
There is no data on either Tradme or QV for 21 listings. (12%)
If anyone needs any help working out how exposed Palmerston North is following the speculation in the market, then please call the helpline 0800 WHAT A BLOODY PICKLE.

Yes, I was recently in Israel, Jordan and Egypt. Im pretty sure I didnt even die once.

Internal migration away from Auckland appears to be hitting high gear.

Unfortunately, support for the Nat is crumbling away so the Coalition will be there for a while longer. Buckle up if you are one of those highly negative geared investors in Auckland as no light in that dark long tunnel just yet!
http://mobile.nzherald.co.nz/nz/news/article.php?c_id=1&objectid=12142614

So how many of the homes currently on the market in Auckland are investment properties that are being marketed while vacant? When they don't sell due to the lack of qualified and finance worthy buyers. They will go back into the rental pool. Further suppressing rents and property values. So those potential buyers who are renting currently have options of finding a better or maybe cheaper property while they continue to save more of a deposit for a house that is only going to get cheaper in the short term.

Ouch those rents are still increasing faster than wages and have now surpassed what my mortgage was each week. Whats the long term trend ? looks to me like its going to be $1000 a week in 10 years time.

No, you're dreaming. That would require most people to be taking home a couple of grand a week in wages, or for most of the rent to be paid by govt handouts. Wages are rising at ~2-3% per annum, so thats going to limit rent rises.

We're at $555 in AK central today. Inflation of 2.5% alone would push it up to $710.45 in 10 years time. And rents have outpaced inflation historically, so it's not that far fetched. Unlikely to be a grand, but to suggest it isn't "dreaming". My guess is $780.

BLSH

According to rounded census numbers, in 2001 there was a total population of 3,744,534 In 2006 that grew to 4,059,876 and in 2013 it accelerated to 4,254,594 . In 2018 we are close to hitting 5,000,000.

If you think that Kiwi's will cope with the current rate of immigration of people who have more money than they do and can price New Zealanders out of pretty much everything, houses, land, assets, businesses. Then you may be correct, but I would suggest that the coming recession will slow that inward migration down and that New Zealanders (seeing what has happened abroad) are ideally placed to put the brakes on migration numbers. Good luck with your historical maths though!

I'm not claiming that anything radical is going to happen in terms of rent. I'm simply suggesting that the long-run trend is likely to continue -

https://www.interest.co.nz/charts/real-estate/median-rents-auckland

I think you're more likely to see rents flat line as population growth flat-lines and the debt burden hits the market. Even the immigrants don't seem to want any more immigration, therefore any party that sees that as a policy option or loses control of it won't stand a chance of getting voted in.

Unless we can increase the housing density, then the suburbs will be pushed out even further and travel times will increase. Petrol could be an extortionate price in 10 years time so rents close to where you work could rise exponentially. Its funny that people think that rents are limited by your income, they are not the rent will just chew off a larger percentage of your income.

.

With rents rising faster than house values over the last 2 years, yields are slowly rising

You have to be well-off to be able to afford to rent and be relentlessly gloomy on house prices...

The cynical solution to the housing crisis:
Increase housing standards from their abyssmally low level, so landlords sell their houses. Bring in lots of new people to buy them. Pack the existing tenants into the few remaining houses, so the rents can go up. Problem solved, providing you're not living 8 to a room, that is.

We need the new people to teach our kids to spell and to build more houses, because apparently we can no longer do either for ourselves. Once our kids can spell they can get a job processing resource consents and building permits.

Well, teaching is not attracting people now that housing costs have soared so high. Basic supply and demand concepts you'd have thought a business-savvy government could grasp. But no, now we taxpayers have to spend millions trying to import more people to address the shortage.

Don’t believe that the average rent in ChCh is around $360 per week!,,,
If it is there are a helluva lot of less than average landlords in ChCh and they are not running their rentals as a business.
Have very recently had to find tenants for 2 properties and we were inundated with people wanting to view and it isn’t even a busy time normally for tenants looking!
Both rented at $450 per week and no down time.whatsoever!
We have got only 2 properties under $360 per week at $350 and $340 and one is grossly under rented for a reason!
Personally don’t care what other people charge for their property for rent and if they want to prop them up each week then that is their doing!
We average between 9 and 10 per cent returns and that hasn’t dropped at any stage.
Sometimes you might drop $10 per week for a renewing tenant but you lift rents on other ones.
If you are a professionally landlord then you will do very nicely at the moment, new rules or not.

It's 'Bond' Data TM2.. so I would have thought that it would be a fairly accurate measure of average. Maybe things are different in your world.

https://www.youtube.com/watch?v=NY3DrA7tJFk

You post this every time the average rental data, and every time I point out that your properties rent for more than average because they're larger than average. I'm not sure why you never get it. The average data includes single bed flats, two bed units etc. and it sounds like you're more into larger houses, hence the difference.

Of course it includes 2bedroom units, but out 2 bedrooms are over $360 per week!
Personally know many investors and often help them with advice.
All their 3 bedrooms are generally over $400 per week and I know that our 3 bedroom rentals are at least $450 per week and have no problem getting that.
If landlords are renting their homes out for less than $360 per week I kindly suggest that they should get out of the rental business as they will be getting a pretty crappy return unless they have owned the property for many many years.
Our 100m2 rentals all rent for in excess of $400

Is that 9-10% based on current value or what they cost you to buy?

On purchase price.
Yes I appreciate the return would be less going on current valuation however we have bought very well and capital gain has been exceptional.
Even if we sold them all there is nothing that will give us the same guaranteed income!!

For those of you who haven't worked out why Auckland's rental income has slowed and will start to decline. It's quite straightforward; When property values decline as Auckland has and is still declining. Home owners often are forced in to renting out their home rather than sell at a lower rate. They are known as Reluctant Landlords renting out their home in the hope that the property market will improve so the can sell at a much higher profit.

In turn floods the rental market and lowers rental rates.
So as long as Auckland's property prices continue to fall so will rents.

I agree.

Moi Aussi. Or should I say, so do the Aussie's.

I do question to source of these rent statistics. Using bond lodgements is likely to come up with artificially low values. According to MBIE they manipulate the way they report the figures. For instance they include bonds being lodged by social housing providers. The rents on social housing are artificially low due to back door subsidies. Rent statistics should be gathered the same way as sales statistics. This is especially important if one is to compare rents with sale prices. Why not report rents as per advertised on Trade Me.

"Rent statistics should be gathered the same way as sales statistics."
Ahh. That's essentially what the bond data is doing - recording the transacted rental prices.

"Why not report rents as per advertised on Trade Me."
That's not how we gather price data for house price indices....Because reporting an index based on non transacted goods is retarded.