Wellingtonians claim that securing sought-after rental properties is becoming a battle royale. Are they over-reacting, or is the shortage of places to live real?
Horror stories of even well-paid young professionals going into battle to find themselves a home in Wellington's cut-throat rental market keep hitting the headlines. It now costs an average $550 a week to rent a house in the capital, and at the rate prices are rising it will soon become a more expensive place to be a tenant than Auckland. How have things got to this point?
There is a shortage of rental properties generally across Aotearoa, and rents are rising as a growing pool of tenants chases too few properties. In April Trade Me announced that the country's median weekly rent had tipped $500 for the first time. Since then price increases haven't shown any signs of slowing with rents up 4.2 percent for the year to November. The number of properties available for rent has remained fairly static, but demand is up 17 percent and therein lies the problem, Trade Me says.
Is it really worse in Wellington than elsewhere?
Wellington does seem to have a particularly bad case of the property shortages. Rents in the capital are up 10 percent for the year, compared with a 1.8 percent rise in Auckland, and its bushy slopes have a lack of homes all round whether you're renting or buying. The number of house sales in the region shrank 13 percent in 2019 while the median house price surged 12 percent to $695,000. Couple that with the city's higher than average incomes and popularity with students and you have a classic demand exceeding supply situation.
How does this compare with the rest of the country?
There are other places that have it quite bad. Rents are up 15 percent in Manawatu/Wanganui, for example, and other regions such as Nelson at 9.8 percent and Waikato at 8.4 percent have endured rent rises almost as steep as Wellington's. There is no doubt life is getting tougher as home ownership rates drop. In 1991 almost three-quarters of Kiwi households owned the homes they lived in but now only 64 percent do, and that means a rise in renters. Today nearly a third of our households are tenants, compared with just 23 percent three decades ago.
Is the shortage because landlords are getting out of rental properties?
No, apparently not. A new analysis shows that more than a third of New Zealand properties are owned by mum and dad landlords. A quarter of houses are owned by people who have between three and 20 properties, and while the figures also cover bach owners they are a good indication that New Zealanders are hardly shying away from property investing.
Isn't the Government bringing in rental reforms? Will that help?
Yes and no. The Government is proposing banning rental bidding, meaning a landlord has to let their property at the advertised price and not solicit higher offers from competing applicants. It also wants to limit rent increases to once a year, as opposed to the current six months. These measures should break the stride of runaway prices, and arguably landlords are capitalising on demand by driving up rents while they still can. Other changes such as axing the landlord's ability to end a tenancy with no reason are aimed at providing renters with more security, and won't do anything for supply. The reforms are also unpopular with landlords who are threatening to sell up because it's all getting too hard. But in any event none of this has come to pass - the proposed law hasn't even been introduced to Parliament yet.
So what's the answer?
At the moment there isn't one, except perhaps doubling down on saving for house deposit or giving the outer suburbs a second glance as potential places to live.