In the aftermath of 2020’s COVID-related freeze on rent increases, it was always likely that there’d be a period of ‘catch up’ growth, which inevitably came through. However, as time has gone by, it’s become clear that this run of strong rental growth is more than just a catch-up phase. What’s driving it, and how long can it continue?
To be clear about where we currently stand, the latest data (from MBIE’s rental bonds system) shows that rents in the three months to March averaged $521 per week, up by 7.0% from $487 a year earlier (which itself was up 4.7% from the figure of $465 in the three months to March 2020).
The growth in Auckland has been a little slower – 3.7% annually in the three months to March – while Christchurch (6.7%) is roughly in line with the national figure, and Dunedin has been a bit above it (7.6%). Other areas to have seen even stronger rental growth of late include Waimakariri (10.0%) and Queenstown (11.6%), as examples. Wellington City has the highest average rent, at $619 per week, followed by Porirua ($615), Auckland ($591), Lower Hutt ($562), Tauranga ($561), and Queenstown ($556). The lowest rents are in Westland, at $308 per week, and Waimate ($312).
Clearly, given that the long-run average for rental growth on this series is about 4% per annum, landlords currently have the upper hand when it comes to pricing. Indeed, the supply and demand balance remains fairly tight in the rental market, and at the same time, landlords will no doubt be looking to recoup higher costs such as mortgage interest and tax (i.e. the phased removal of interest deductibility). These motivations for landlords aren’t about to dissipate anytime soon.
However, the track record also shows that,...
