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03 May 2013

The State of the Rental Market

Changing conditions in the property market continue to influence the rental sector, with strong supply cooling down the market in some areas. However, while more rental houses are available and demand is falling compared to a year ago, asking rents continue to rise across much of New Zealand.

According to figures released by Trade Me Property, there has been a 5 percent increase in rental property listings over the last year, with a 2 percent decline in demand during the first quarter of 2013. Overall, these figures point to a relaxation of recent tight conditions, especially in desirable parts of Auckland. National asking rents were up 3 percent over the year.

The situation in Auckland is starting to level off, with rental demand down as more properties hit the market. Despite nation-wide and city-wide increases, the cost of renting in some central Auckland locations is starting to fall. Trendy areas such as Ponsonby and Grey Lynn are leading the slowdown, with dropping rents in these expensive areas perhaps the first sign of over-supply in the wider market.

According to recent figures released by property management company Crockers, rents for three-bedroom homes have fallen from $716 to $702 in Ponsonby over the last 12 months, with the Pt Chevalier/Mt Albert area falling from $533 to $517 and Remuera falling from $661 to $620. With rents rising over the last few years and interest rates still low, property commentator Alistair Helm thinks the slowdown is partly due to more renters becoming first-home buyers.

"I think there's a slight power in the hands of tenants, because there is a better supply of property coming on to the market, and not as much demand... First-home buyers have kind of left the market - they bought, who used to be renting. And I think that's created a degree of surplus in the rental market, particularly because those people might well have lived in the inner-city suburbs."

According to the Trade Me Property report, interest from prospective tenants is down 12 percent in Auckland City, 11 percent in Waitekere, and 7 percent in North Shore. With overall listings increasing 13 percent in the last quarter and demand falling 7 percent, the rental market in Auckland is levelling out in some areas and changing direction in others.

In Wellington, rental demand is only just managing to keep up with supply, with available listings down 3 percent over the year and rental enquiries up 2 percent. Other parts of New Zealand are continuing to experience pressure, with rental prices up 6 percent in Lower Hutt, fuelled by a massive 19 percent growth in rental enquiries.

The situation in Christchurch is even more severe, with 19 percent fewer listings and 30 percent more enquiries making for a very tight rental market indeed. The ongoing pressure in the Christchurch market has led to rental increases of 24 percent over the last 12 months, a figure much higher than the 3 percent national increase.