Supply catching up with demand in rental market
Property investors throughout most parts of New Zealand are enjoying gains in their rental income, but those increases are occurring at decreasing rates.
Rents rose by 4.0% (as per the flow measure) in the year to July 2022, according to the most recent data from Stats NZ.
That was down from 4.9% year-on-year growth in July 2021.
Four of the five main regions covered by Stats NZ also recorded lower levels of annual rental gains, when comparing July 2022 with July 2021:
- Auckland = 1.1% (was 3.1% the previous year)
- Wellington = 4.2% (was 5.4%)
- Rest of North Island = 6.2% (was 8.0%)
- Canterbury = 7.4% (was 4.0%)
- Rest of South Island = 7.7% (was 9.8%)
Why rental growth is slowing
In the rental market, as with most markets, prices tend to reflect supply and demand. When prices rise, it’s generally because demand exceeds supply; and when price growth slows, it’s generally because the gap between demand and supply narrows.
It wouldn’t be surprising if something similar was playing out in New Zealand rental markets.
National valuation group QV, reporting the most recent tenancies data, said bonds were received for just 10,893 residential tenancies in June.
"That was the lowest number of bonds received in any month of the year and the first time it has been below 11,000 since current records began in 2012, apart from the lockdown-affected months in 2020 and 2021," according to QV.
"The fact that rents continued their normal winter decline while the number of properties tenanted dropped to a new low suggests the rental market may be easing, with supply starting to catch up with demand.
"If the drop in the number of tenancies was caused by a shortage of available rental properties you would expect rents to be rising."
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