Rents continue to resist inflationary pressure

For the fifth consecutive month, the national median rent remained unchanged at $400 per week and up just over 5 per cent on a year ago, according to the Trade Me Property Rental Price Index out today.

Head of Trade Me Property Nigel Jeffries said that over the course of 2014, the rental market proved to be very stable. "We saw the national median weekly rental land at $385 in January, then it gradually eased up to $400 in the middle of the year. It stayed there for the rest of 2014."

He said the situation for rentals was "chalk and cheese" when compared to the property for sale market. "Around residential property for sale we’ve seen continuous price pressure and an inflation rate of over 12 per cent throughout 2014. Clearly many landlords are more focused on capital appreciation rather than yield."

Looking at the long-term situation, the focus on capital growth is even more evident with the 5-year trend in rents showing a rise of just $50 a week, from a median weekly rent of $350 in December 2009 to $400 per week in December 2014 (up 14.3 per cent).

Ups and downs in the regions

Echoing the static national rent inflation across 2014, the trends in rents across many regions are equally moderate. Only two of the fifteen regions showed double-digit growth for the year with the Bay of Plenty median asking rents up 13 per cent to $340 per week, and Taranaki up just under 13 per cent to $350 per week.

In contrast, only two regions showed falls in rents with Manawatu/Wanganui mediasn asking rents down 4 per cent to $230 per week and the West Coast down nearly 6 per cent to $250 per week.

Of the major metro areas, only Wellington and Christchurch saw increases through 2014, with median weekly rents up 3.9 per cent and 4.8 per cent respectively. Auckland has ended the year at the same weekly level as a year ago, with a median asking rent of $450 per week.

A couple of regional records were set in December 2014: in Northland rents were up 5 per cent across the year to $300 per week, and in the Bay of Plenty a year-on-year increase of 13 per cent saw median weekly rents land at $340 per week.

Rental demand focused on medium-sized properties

Mr Jeffries said "the heart of the rental market" was medium-sized homes of three or four bedrooms. "These are the most sought after by tenants and continue to be the driver of rental prices across the country’s three major metro markets."

In Auckland weekly rents for medium sized homes ended the year back at the peak of $520 per week first reached in April 2014.

Wellington began the year at $480 per week for a medium-sized home in January, then slipped down throughout the year to end at $450 per week. Christchurch began 2014 at $480 per week, maintaining that level to end up slightly at $485, having reached a high tide mark of $500 a week for five months of the year.

Unit rents showing the fastest growth

Mr Jeffries said demand for units as an affordable renting option was driving rents in the metro markets of Auckland and Christchurch. "With annual growth of 7 per cent, weekly rents for units in Auckland were $375 per week in December, up from levels of $350 at the end of 2013. In Christchurch units ended the year at $340 per week, up 6 per cent from a year ago."

Property rents plateau in November

The median national rent was unchanged at $400 per week in November, but is up more than 5 per cent since November 2013, according to the Trade Me Property Rental Index out today.

Head of Trade Me Property Nigel Jeffries said the median weekly rent had been “stuck in the mud” for four consecutive months. “There’s less price pressure on tenants and a healthy supply of properties for rent in many areas. Although the weekly rent is holding steady at $400 per week, the year-on-year increases are trending down.”

He said the rental sector was quietening, at the same time as asking prices for residential property sales were emerging from a winter slump.

Rents growth slows compared to prior years

Looking at the long-term trend, growth in median weekly rents is dominated by the period between 2011 and 2014, despite the plateau in the past six months. Since 2009, the median weekly rent has risen by more than 21 per cent. This compares with a 28 per cent increase in average asking prices for residential properties over the same period.

Ups and downs across the regions

Three regions recorded year-on-year falls in weekly rent: the largest was in Manawatu/Wanganui where it fell almost 10 per cent to $230 per week, well below the region’s peak of $260 per week in October 2013.

The West Coast continues to be weak, down 4 per cent on a year ago to $240 per week. Otago landlords have enjoyed strong median rent rises of around 6 per cent most of 2014, but median rents slipped 1.6 per cent this month.

Twelve regions saw median rent increases, led by Taranaki which is up 16 per cent to $350 per week – tenants are paying fifty dollars more than they were a year ago. The top of the South Island is also showing increased activity with both Nelson and Marlborough recording new highs of $360 per week and $318 per week respectively.

Pressure remains in Christchurch but Auckland easing

Mr Jeffries said the tight rental market in Christchurch was still in play, and although the median weekly rent of $450 had not budged since October, it was up almost 6 per cent on a year ago. Beyond the headline figure for all properties the recent pressure around large and medium-sized houses has decreased slightly with a year-on-year fall of 0.7 per cent to $695 per week.

Auckland was also unchanged on $460 per week – but still at a record-equalling high. Mr Jeffries said there were hints that the rental market was easing in the City of Sails, with a 2.2 per cent increase compared to November last year.

In Wellington there was a 2.7 per cent rise in weekly rents, underpinned by a 10 per cent lift for medium-sized houses to $440 per week (still $40 per week lower than the all-time high back in January 2014).

Townhouses see strong lift

Townhouses reached a new high with a national median rent of $450 per week, up 7 per cent as compared to last year.

The unit market remains strong with national weekly rents at $310 per week, down just $10 from the record high in October. In Christchurch, the pressure has pushed this segment of the market to a new high of $340, up 6 per cent on a year ago.

Christchurch drives nationwide rental increase of 6 per cent

The median weekly cost to rent a house in New Zealand has risen more than 6 per cent on a year ago, according to the first edition of the Trade Me Property Rental price Index released this morning. The median weekly rent was $399, up from $375 in October 2013.

Head of Trade Me Property Nigel Jeffries said the increase was underpinned by the "scorching" rental market in Christchurch where median weekly rents have soared 20 per cent year-on-year to a new record high of $510 per week. A month ago the weekly rent was $465 per week and a year ago it was $425 per week.

"With 12,000 houses removed from the city and an influx of workers moving in for the rebuild, the rental market remains under pressure in Christchurch," he said. "As new property developments emerge and residential repair work is completed we’d expect to see things settle down – but it hasn’t yet."

The new Index measures trends in rents for all properties rented through Trade Me Property by private landlords and property managers in October. It provides tenants, landlords and property managers with information about the rental market across the country by property size, type and region.

Mr Jeffries said the rate of increase in rents across New Zealand had been steep over the past three months. "In August, September and October we’ve seen median rents all breach the six per cent mark, with September up 7.8 per cent year-on-year. Rents look to be rising faster property asking prices, which indicates things are tightening up for tenants."

Around the grounds: up, down, and static

Six regions saw year-on-year median rent increases, six were down, and three were unchanged.

Auckland remained "reasonably stable" with a year-on-year increase in median weekly rent of 2 per cent ($460 per week) and Mr Jeffries said this modest rate of annual increase has been consistent over the past six months. The Auckland rental market is dominated by 3 and 4-bedroom houses which saw a 5 per cent increase.

The increase in weekly rents in Wellington was strong, up 9.5 per cent on a year ago. Mr Jeffries said the increase was across the board in the capital, with the largest homes attracting now $700 a week and up 27 per cent compared with October 2013.

Leading all regions on the increase front was Taranaki where the median weekly jumped 23 per cent compared to a year ago, landing at record high of $370 per week. "Taranaki is experiencing something of a mini boom off the back of the energy sector in New Plymouth," Mr Jeffries said. "We’ve seen strong price inflation in property asking prices in the region too."

He said it was no surprise to see Canterbury median rents increase significantly, given the market is dominated by rental activity in the Christchurch metropolitan area. Across the region there was a 22 per cent rise.

Manawatu/Wanganui delivered the largest fall in median weekly rent, down 11 per cent in the continuation of a trend that began at the start of the year. "Wanganui has had some bad press from economists and commentators, but if you’re a tenant it is good place to be if you want to tighten your belt," Mr Jeffries said.

Medium-sized properties driving increase

The inflationary pressure on median rents is strongest for medium-sized properties, with rents up close to 10 per cent year-on-year.

Apartment market still strong

Mr Jeffries said the rental market for apartments remained strong, with record highs in weekly rents in Auckland (up nearly 9 per cent to $430) and Christchurch (up 29 per cent to $452).

Mirroring the negligible growth in median weekly rents for small houses, the rental market for units is the weakest segment with rent levels unchanged at $300 per week. Units in Wellington and Christchurch buck this trend, and were up by more than 7 per cent year-on-year.

Long-term trend

Looking at the trend over the past five years, Mr Jeffries said most significant rises in median weekly rents had come in the past two years. "Tenants were paying a median weekly rent of $360 a week at the end of 2012, and now they’re having to dig out another $40 more each week."