Rent freeze set to change NZ rental market
The freeze on rental increases for the next 6 months imposed on March 26th is likely to change the NZ rental market.19 May 2020
2 Ruawai Road, Mt Wellington
Rent freeze set to change NZ rental market
The impact of COVID-19 and the Government’s move on March 26th to freeze residential rent increases for the next six months is likely to change the New Zealand rental market, according to the latest Trade Me Rental Price Index.
Trade Me Property spokesperson Aaron Clancy said the national rental market had seen strong price growth in the last 24 months, but the impact of COVID-19 and the rent freeze could stop this growth in its tracks. “After many of New Zealand’s fifteen regions experienced months of solid price growth, the impact of COVID-19 will significantly change the playing field for landlords and tenants in 2020.
“The rental price freeze will bring a sense of relief to renters that are facing many unknowns. But it may be a concern for landlords with uncertainty around their own costs. Ongoing discussions on potential council rate increases will be making some landlords nervous.
“During these challenging times it’s important that there is clarity for both parties, so we hope landlords will have more certainty in the coming months. For now, it is imperative tenants and landlords communicate with each other and - in the words of the Prime Minister - exercise kindness and understanding while we all figure out what the new normal looks like.”
Mr Clancy said he expected to see an increase in demand in May as the alert level restrictions loosen. “After spending seven weeks at home, many Kiwis will have had plenty of time to rethink their current living arrangements.
“So far in May we’re seeing a lot of activity onsite with listings of rental properties shooting back up when compared to April, and plenty of potential tenants coming on to search for a new home. We expect to see some very interesting numbers at the end of the month, we suspect plenty of tenants are looking to make a move and will be enticed by the fresh stock that will hit the market.
“It’s beyond May where things get unclear - with landlords unable to issue notice to terminate tenancies for the next few months, the rental freeze in place - and uncertainty around the economy - may cause a dip in the supply of rental properties. However, short term accommodation being moved on the long term rental market could help to balance supply levels.”
April shows strong price growth despite rent freeze
Mr Clancy said the national median weekly rent per week was $520 in April - a 4 per cent increase when compared to April 2019.
“We still saw strong increases in the national median weekly rent in April because our Rental Price Index data is based on a three month rolling average. So while it’s too early to see the impact of this announcement at this stage, we could see prices slow by mid-winter.”
Mr Clancy said there had been an expected slow down in the market last month as a result of the alert level 3 and 4 restrictions. “The limitations of lockdown meant that both tenants and landlords had to sit tight until they could move or get a property listed - this has resulted in both supply and demand for rentals dipping significantly in April.
“The number of properties available to rent in April dropped by 26 per cent when compared to the same time last year. Similarly, the number of enquiries on rentals dropped by 55 per cent when compared to this time April 2019.”
Spike in searches for fully furnished rentals
“In April, we saw a phenomenal 35 per cent increase in the number of searches for fully furnished rental listings when compared to the same month last year. We think this increase could be because people were looking to make a quick and easy move to meet their changing needs during alert levels 3 and 4 - such as relocating to be closer to family, or looking for more space to work from home”
“We also expect the news that many investment property owners were putting their short term rentals on the long term market played a role in the spike in searches for furnished properties, with people assessing their options.”
Wellington weekly median rent sees healthy growth
Mr Clancy said the capital had a strong month in April, with the rental prices continuing their steady climb. “The median weekly rent in the Wellington region hit $575 last month, an 8.5 per cent increase when compared to April 2019.”
Taking a closer look at the region, the districts with the highest median weekly rents were Wellington City, Porirua and Lower Hutt. “The median weekly rent in Wellington City rose 1 per cent on the year prior to $580. Porirua had a median weekly rent of $600 and Lower Hutt’s median weekly rent was $590 - up 10 per cent and 19 per cent year-on-year respectively.”
Mr Clancy said reflecting the national trend, the number of properties available for rent in Wellington dropped in April. “The number of rental listings were down 27 per cent when compared to the same time last year.”
“Likewise, demand for Wellington rentals was down 59 per cent on the month prior, and down 57 per cent on April 2019.”
Auckland rental prices flat on March
After modest growth over the last few months, Mr Clancy said Auckland rent prices slowed in April. “The median weekly rent in Auckland was flat on the month prior, remaining at $580. When compared to this time last year, we have seen a 4 per cent increase, when the median rent was $560 per week.”
Within the region, the districts with the highest median weekly rents were Waiheke Island, North Shore City, Auckland City and Rodney. “Waiheke Island had a median weekly rent of $710, up a significant 31 per cent on April 2019. The median weekly rent in North Shore City was up 5 per cent year-on-year to $630.”
“The median weekly rent in Auckland City and Rodney were both up by 2 per cent when compared to April last year, at $575 and $560 respectively.”
Following the national pattern, Mr Clancy said supply and demand were both down in the Auckland region. “The number of enquiries on rental properties across Auckland was down 54 per cent on April 2019. The number of properties available to rent in Auckland was down 31 percent when compared to the same month last year.
Regional rents see double-digit growth
Across the provinces, Mr Clancy said median weekly rents increased in most parts of the country last month. “Last month, Manawatu/Whanganui, Otago, Southland, and Hawke’s Bay all saw year-on-year percentage increases in the double digits.”
“In the Manawatu/Whanganui region, the median weekly rent reached a record-breaking $420 - up 17 per cent when compared to April 2019. The median weekly rent price was $360 in Southland - up 13 per cent on April 2019.”
“Otago was another region that had a record-breaking month, with the median weekly rent price reaching $530. This is a 19 per cent increase when compared to April 2019.”
Medium and large houses have record-breaking month
Mr Clancy said the median weekly rent of large (5+ bedrooms) and medium houses (3-4 bedrooms) both reached new highs in April.
“When compared to April last year, the median weekly rent for a large house increased by 6 per cent to $885 while medium houses increased by 5 per cent to $580 per week.”
“In the Auckland region, the median weekly rent for small (1-2 bedrooms) and large houses reached record-breaking highs, both up 11 per cent from this time last year, at $520 and $980 respectively.”
Median weekly rent by property size & region: April 2020 vs April 2019
- About the Trade Me Property Rental Price Index: This report provides a comprehensive monthly insight into the rental market covering price trends by type and size of property across New Zealand. The index is produced from Trade Me Property data of properties that have been rented in the month by property managers and private landlords. On average over 11,000 properties are rented each month and the report provides a comprehensive insight into this part of the property market for tenants, landlords and investors. The index is calculated using the rounded median rent in the month, this being an accurate statistical assessment of the current rent being charged by landlords and property managers.
- More info: For information about the differences between the Trade Me Property data and bond data collected by Tenancy Services, please read this post by Dr Lucy Telfar-Barnard from the University of Otago: http://onetwothreehome.org.nz/2015/05/11/how-high-is-the-rent/