Record migration and high interest rates: The 'perfect storm' that's causing rents to soar

Rents for apartments and townhouses have climbed to record highs in Trade Me's latest update, in what's been described as a "perfect storm" of record migration and high interest rates.  

Trade Me data shows Aucklanders are paying an average of $680 a week in rent. It's apartments and townhouses in most demand, with the latter fetching an all-time high of $730. 

In the year to December, New Zealand gained 126,000 people through migration - with up to 60 percent of them living in Auckland. But it's on the North Shore where rents have risen the most, up 4.2 percent to $720 a week.  

Troy, who lives on the North Shore, has been looking elsewhere.   

"I was looking at moving to Ponsonby because that's where I work, but places out there that I could get were $400 to $500," he told Newshub.  

It doesn't help landlords are battling high interest rates. In the year to June, average mortgage payments increased from $475 a week to $605 - a 27.5 percent rise, according to Statistics NZ.  

That's the biggest single-year increase since 2008.  

Trade Me's property sales director Gavin Lloyd describes the driving forces behind rising rents as a "perfect storm".   

Lloyd. Photo credit: Trade Me

"Migration is remaining at that all-time high, putting a lot of pressure on the rental market and then on top of that, landlords are having to deal with really high interest costs," he told Newshub.   

All eyes are on the Reserve Bank's official cash rate (COR) update next week.  

The OCR is the rate at which commercial banks borrow from the Reserve Bank.  

When it goes up, banks need to charge customers more to remain profitable - so that's when home loan rates go up.  

The Reserve Bank does it to bring down inflation, because higher interest rates mean homeowners have less money to spend - thus demand cools.   

Inflation has been tracking down since the heights of 2022 in the aftermath of COVID-19 lockdowns. That stability gave the Reserve Bank confidence to end its 12 consecutive OCR hikes.  

It's remained at 5.5 percent since May.  

Adrian Orr.
Reserve Bank Governor Adrian Orr. Photo credit: Getty Images

But ANZ chief economist Sharon Zollner is convinced the OCR will rise again.   

"Although the economy has definitely felt the blow of that tighter monetary policy, the Reserve Bank can't be confident that some of those sources of inflation aren't going to persist - and rent is an important one," she told Newshub.   

In other words, if demand for rentals keeps going up, so might the OCR.