The New Zealand rental market continues to go from strength to strength as the average rental price in New Zealand is up 4.2% compared to November last year. If you exclude Auckland it would be 7.1%. As property prices increase across the country in the smaller towns so do rents.
It’s been an exceptional year this year for rents as in May of this year the national medium rental price hit a new record high of $500 per week. This has continued on during the recent months and doesn’t look like it would drop back. We can only see more price increases as property prices increase across the country. This is good for landlords but not so much for tenants as the peak season is just starting and will continue throughout until around end of March once all university students are back.
One of the biggest challenges facing cities is the lack of properties available for rent. Christchurch is probably one of the only big city centres to have supply, where as in Wellington city it is the most expensive place to rent, at an average of $585 per week, beating Auckland by just $15 at $570 per week. This is due to the lack of properties in Wellington City, demand is still high, and stock is not coming on quick enough to slow rental prices. The earthquakes have made a significant impact on the property market in the CBD resulting in many buildings being condemned or just left for the professionals to decide what to do with them. Wellington City Council needs to step up their game and push through by building more apartments and developing the city, the lack of land and slow build times make it a recipe for disaster. Hence why Lower and Upper Hutt, Porirua and along the Kapiti Coast are becoming more popular to live and commute.
At this stage in the cycle with property prices the way they are, landlords are still looking for good yields, hence rents increase to meet new high property prices. This is unfortunate for renters as they are dealt a double blow with the lack of rental properties on the market. Renters have lack of choice and the good rental properties go quickly. If you are a new landlord to the property market or looking for a new tenant make sure the property is clean and tidy from the get go. These types of properties are always the first ones to go, tenants like to see that a property is clean and that the landlord does care about the property and the tenant. It doesn’t take much effort and takes little time and cost, even a new lick of paint goes a long way in attracting a great tenant, you can even do it yourself!
Source Trademe Property
Cheapest Place to Rent in New Zealand
– Based on all property types and all number of rooms
– Medium rent
– Cheapest places to rent in the country are:
- Ruapehu $240
- Buller $240
- Wairoa – $245
- Clutha/Southland – $255
- Rural South Taranaki $260
- Westland – $260
- Tararua $270
- Stratford -$270
- Gore $275
– Source QV.co.nz
- Otahuhu – $330pw
- Central East – $437pw
- Newton/Grafton – $440pw
- Mangere East – $420pw
- Manukau Central – $440pw
- Claudelands – $320pw
- Hamilton Central/Maeroa/Frankton Junction – $350
- Mt Cook – $415pw
- Lambton – $435pw
- Northland – $460pw
- Addington – $260pw
- Riccarton – $320pw
- Linwood/Philipstown – $340
- Central Dunedin – $282pw
- Caversham – $335pw
Property prices and government taxes
With the way property prices are many Kiwis are still priced out of the property market to be able to afford to purchase a home. This has a big effect on the rental market, pushing up property prices and also the lack of properties available to renters doesn’t help.
Of course, rents are on the rise because of the continued costs put onto landlords by new government regulations and tax implications or lack of tax breaks for landlords.
Many years ago, building depreciation was removed, then came the bright-line test from 2 years which then moved to five years (which is a capital gains tax which I think investors have forgotten about). Then this year ‘Ring-Fencing’ has been introduced from April 1 st 2019, though we won’t see the full ramifications until the after April 1 st 2020 when landlords notice they will no longer be able to off-set losses through their salary, but instead these losses will be carried forward and offset against any future income derived from residential rental property.
Plus lets not forget the insultation regulations and the Healthy Homes Act that has been introduced and now the government wants to make it even harder to evict bad tenants.
All this pressure is making landlords think is it all really worth it? Landlords want to protect their tenants, they want them to have a safe, warm and dry home to live in, but it needs to work both ways. The government needs to cut the red tape and build, build, build.
Once the supply exceeds demand then you will see price drops and only the rental properties that are well looked after by landlords will actually get tenants.
Landlords and tenants work together, without one the other doesn’t exist.