The latest Massey University Residential Market Report, released last month, shows a steady increase in the number of people renting, coupled with a decrease in vacancy rates and renters staying longer in the same property.
The report tracks trends and changes over the past decade and report co-author and Massey Business School head of property Associate Professor Graham Squires says the changes are due to the combination of an increasing population and a decrease in home ownership.
“The long-term trend shows fewer first-time homebuyers, as deposit values rise out of reach, which means many are renting for longer,” says Dr Squires.
There are also clear signs that rental markets have tightened over the past five years across New Zealand. The number of new bonds lodged with the Ministry of Business Innovation and Employment Bond Centre shows the tenancy turnover rate for rental properties is on a steady downward trend.
“One of the first signs of a tighter rental market is a decreased vacancy rate, followed by rent increases,” Dr Squires says. “Renters tend to stay longer when it is difficult to find alternative accommodation, and families generally prefer to stay put if their children are settled at school.
“A tight rental market also makes it difficult for people to move to new job opportunities, particularly in Auckland and Queenstown where rents are relatively high.”
The report also notes rents have risen steadily over the past five years across the board, with the average national rent increasing by 25.5 per cent over that time. Some of the largest increases have come outside the main centres, particularly in the tourist areas of the South Island.
There have been significant increases in rent over the past 12 months.
“The national mean rent increased to $411 per week from May 2017 to May 2018, which is a new high and represents an annual rate of increase of over 4 per cent,” Dr Squires says. “Overall, rents continue to track above the rate of inflation.”
He says the outlook is for a tightening rental market both in terms of demand, due to population increase, and supply, due to constraints in the number of rental properties available.
“This is despite the appeal of property investment in New Zealand. While property investors add to rental stock, they can also increase housing affordability problems, leading to would-be homebuyers renting for longer.”
The full report, which can be downloaded here, draws on sector rental data supplied by the Ministry of Business Innovation and Employment Bond Centre and information on wage rates, demographics and the structure of the rental housing stock is drawn from Statistics NZ data. House price information has been extracted from Real Estate Institute New Zealand (REINZ) and Quotable Value (QV) NZ statistics.
