The same forces that have seen housing prices become a national issue are propelling house rentals to new highs on the back of ‘market-related’ price surges.
Median rentals are now nudging $600 a week in both Auckland and Wellington, on the strength of a 13 percent increase in demand last month alone, new data from online auction site Trade Me showed.
That is ahead of Sydney, Australia’s most expensive rental market, where the median is at A$550 per week, according to Australian property group Domain.
While rental supply is up by 11 percent across the board — reflecting the frenzied increase in investment buying of late and the absence of international workers and students — median rates still managed to jump by 4 percent last month on a year-on-year basis, Trade Me said.
Property investors made up 27 percent of the residential buying spree last quarter, helping push New Zealand property values up by 6.1 percent to the highest level in 17 years, according to Corelogic senior property economist Kelvin Davidson.
Trade Me property spokesperson Logan Mudge said that could make 2021 a difficult one for tenants as the supply and demand cycle is “only going to lead to higher prices.”
It will be made all the more acute as many leases change early in the new year and “there’s always massive demand from students in the first few months as they move around the country,” Mudge said.
Auckland property group Barfoot and Thompson said the average weekly rental across its 16,500 managed properties in the city had climbed to $595 in January.
That reflected an average increase of $624 per year, or more than $50 per month, on 2019 prices in the city.
Director Kiri Barfoot said three-bedroom homes — as a barometer of the market — were up to $597 per week on average to rent led by central Auckland, at $992 per week, and the eastern suburbs at $706 per week.
Barfoot said property managers are reporting increased activity with high volumes of prospective tenants attending viewings.
“And while we are seeing some owners choosing to exit the market, we are also seeing an increase in the number of rental appraisal requests from new investors,” she said.
Wellington keeps pace
Trade Me’s numbers, meanwhile, show the nation’s capital is on the same trajectory, led by Porirua at a median weekly rental of $635 and Wellington city with rentals going for a median price of $620 per week.
Mudge said the rental trends weren’t limited to the two major cities with demand spiking in coastal regions like Nelson/Tasman and Bay of Plenty, up 43 percent and 31 percent respectively.
Those rental price increases broadly align with house price increases over the past three months, led by 10.2 percent year-on-year increases in Tauranga and an 8.1 percent rise in Wellington house prices.
Corelogic’s Davidson said that could well be tapered back, however, by the likely introduction of a 40 percent deposit requirement for property investors as well as the extension to the current five-year hold period for the bright-line test, which would potentially expose more property investors to income tax.
Affordability challenges could also start having more of an impact, he said.