New Zealand tenants aren’t fairing much better than their Australian counterparts, with weekly rents rising 6.1 per cent in the past 12 months.
According to CoreLogic New Zealand, rental growth is at historically high levels, roughly double the long-term average growth rate of 3.2 per cent.
However, growth rates have been mixed across the major cities, with Wellington and Dunedin recording slower rental growth, while Christchurch, Hamilton, Tauranga, and Auckland have all accelerated.
Rents have increased roughly 11 per cent in Christchurch, 8.5 per cent in Auckland and 7.5 per cent in Hamilton over the past year.
CoreLogic NZ Chief Property Economist Kelvin Davidson said high immigration levels had put a strain on the rental market at a time when investors haven’t been buying.
“The recent quiet patch in purchasing activity by investor groups will have dampened rental supply at a time when soaring net migration is placing upwards pressure on demand,” Mr Davidson said.
“Our latest buyer classification data shows mortgaged investors are responsible for just one in every five purchases, as higher deposit requirements, low rental yields, and lack of mortgage interest deductibility reduce some appeal.
“It’ll be intriguing to see how they perform in the coming months after a change of government and ‘property friendly’ policies.”
Nationally, rental yield edged back up to 3.2 per cent from a trough of 2.6 per cent for much of 2022 and the highest level since late 2020.
Mr Davidson said despite the increase, yields were still relatively low by past standards, and less than the income returns on some other asset classes, such as term deposits.
“With rising rents and yields, and some more investor-friendly tax policies on the horizon, we may see investor participation begin to rise, albeit slowly,” he said.
Across the main centres, Auckland yields remained the lowest and Wellington is also below 3 per cent.
“The Reserve Bank has also taken a bit more time recently to ponder debt-to-income ratios and how they might impact the market,” Mr Davidson said.
‘However, even if they’re not imposed for another year or so, this property recovery still looks likely slow and patchy, given the challenges of high mortgage rates.”
Meanwhile, the sharp fall in prices appears to be over with CoreLogic data showing home prices rose 0.4 per cent in October – the first increase in 19 months (since March 2022).
“In other words, the downturn is now ‘officially’ finished, with the peak to trough decline sitting at around 13 per cent,” Mr Davidson said.
“But at the regional level, trends still remain a little patchy, with some areas up in recent months, yet others down.”
