Housing: Rents rocket to all-time high, record biggest annual increase with warning for after lockdown

New Zealand rents have rocketed over the last year, with new data showing prices have reached an all-time high and seen the biggest year-on-year increase on record.

There's also a warning of a potential flurry of activity in the market after the latest lockdown.

Trade Me's latest Rental Price Index, released on Thursday, shows the national median weekly rent hit $550 in July, a record-breaking increase of 10 percent over July last year. Without Auckland in the mix, the increase was still a significant 8.7 percent. 

"After remaining stagnant for three months from March-May, we saw rents take off again in June with the median weekly rent reaching $545 and then climbing again in July," said Trade Me Property Sales Director Gavin Lloyd.

"This marks the largest price growth we have seen in the rental market since we started recording rents in 2015."

A year ago, landlords were unable to increase rents due to a six-month freeze imposed by the Government in March 2020, at the start of the country's month-long alert level 4 lockdown. Prices dropped slightly, but when the freeze ended, they skyrocketed. Legislation introduced in the intervening period means landlords can now only increase the amount once a year

Looking at July's data, records were broken in Taranaki and Auckland, with the only region not seeing a year-on-year increase being Otago, where rent dropped by 2 percent.

Housing: Rents rocket to all-time high, record biggest annual increase with warning for after lockdown
Photo credit: Trade Me.

Demand for rentals has increased 1 percent nationwide, with Canterbury and Nelson/Tasman the regions seeing the largest uplift in demand year-on-year, 26 percent and 18 percent respectively.

But there remains the issue of demand outweighing supply, with the number of rentals down by 8 percent nationwide. The only regions to see a supply increase were Southland (8 percent) and Waikato (3 percent). 

"As long as supply is unable to catch up with demand we wouldn't expect to see this

rate of growth ease off any time soon," Lloyd said. 

"Last year after the nationwide lockdown, we saw the rental market heat back up quickly. After being stuck at home for alert level 4 last year, many tenants decided their rental wasn't up to scratch and we saw a flurry of activity in the market as soon as we moved down alert levels and things began to get back to normal. 

"We're expecting a similar thing to happen after this lockdown ends, especially as we enter warmer months that are typically busier anyway."

Green MP Chlöe Swarbrick on Tuesday asked Finance Minister Grant Robertson at the Finance and Expenditure Select Committee whether a rent freeze would be reinstated.

"At the moment, we haven't taken that decision," he replied. "We will continue to look and monitor as to where we end up with this particular outbreak. Obviously, we did do that last time.

"Since then, we have now moved to the position where there can only be one rental increase in a 12-month period. So that is one thing that has changed from the situation we were in before now. We are keeping a very close eye on this."

Grant Robertson.
Grant Robertson. Photo credit: Getty Images.

The current alert level 4 lockdown, which began last Tuesday night, is scheduled to last until Friday night for most of the country and until next Tuesday night for Auckland. Extensions past these points have not yet been ruled out.

Trade Me's July figures show for the first time, Upper Hutt and Lower Hutt have overtaken Wellington City to become the most expensive districts in the Wellington region. In Upper Hutt, median weekly rent hit $625, up 30 percent over the year to overtake Wellington City by $30. In Lower Hutt, rent hit $600, up 9 percent.

The Wellington region as a whole has seen rents increase 7 percent to $595, with demand down by 2 percent and supply down by 3 percent. 

"After months of pent up demand, we will likely need to see consistent slowing demand to see prices in the region cool off," Lloyd said.

"The most popular rental in the region last month was a two-bedroom house on Meadows Avenue in Lower Hutt, for $490 per week. The property received 63 enquiries in its first two days onsite."

In Auckland, the median weekly rent was $595 in July, up from $590 - the first increase the region has seen this year. The most expensive districts were Waiheke ($720), North Shore CIty ($635), and Papakura ($620). Demand was down 5 percent while supply also fell 2 percent. 

"July's most popular rental listing in Auckland was a two-bedroom apartment on Dene Court Lane in North Shore CIty, with a weekly rent of $450. It received 87 enquiries in its first two days onsite."

The median weekly rent for all house sizes saw an annual increase in every region, with small (1-2 bedroom) properties seeing the largest jump - up 9 percent.