Good tenants hard to find

Residential rentals have turned to a tenants’ market, even though rents took off again in July, rising by 2% nationally to sit at $580 a week.

Choice and bargaining power for tenants

However, in Auckland, the country’s biggest rental market, rents remained stagnant for the fourth month in a row at $600 a week. This is an increase of just 1% year-on-year.  

Up until a couple of months ago the rental market was definitely in the landlords’ sphere but with an oversupply of rentals, landlords are finding it difficult to attract good tenants.

The number of rental listings across the country jumped by 13% in July, with a couple of spots around the country seeing massive year-on-year increases consistently, TradeMe data shows.

Wellington continued to lead the charge for the third month in a row in July, with the number of rentals in the region up 49% year-on-year. Some rentals have been empty for three months and more even though rents have been dropped. Last year they would have rented immediately.

In a matter of weeks, the capital’s rental market turned from a shortage of homes to an oversupply and not enough tenants, says Tommy’s principal sales director Nicki Cruickshank.  Rentals are sitting empty, although landlords have dropped rents. “It’s a tough market,” she says.

“Tenants in good rentals are staying put and there are just not enough other good tenants around. Those looking have a lot of choice and, in some cases, bargaining power. It’s an extremely tough market, particularly for landlords who have mortgages and increasing costs associated with being an investor to pay,” says Cruickshank.

Weakest result

In a recent Tony Alexander/Crockers survey a net 16% of respondents now say it is hard to attract good tenants and trends suggest soon there will be more landlords finding it hard to get good tenants than finding it easy.

Alexander says this is the weakest result ever in the monthly survey, which has been running for about a year.

CoreLogic puts some of this down to accidental landlords – investors who want to sell but can’t get the price they want and have put their property into the rental pool.

The glut of rental properties follows a noticeable drop in the number of investors planning to raise the rents they charge over the next 12 months – easing to a record low of 65% from 70% in July and 77% in May and June, the Tony Alexander/Crockers survey shows.

Independent economist Tony Alexander says a factor behind the slowing pace of rent rises is that many landlords will by now have caught up on rent increases either prevented or voluntarily slowed down during the pandemic.

CoreLogic research head Nick Goodall says with house prices down about 8% from their peak, the flow of properties into the rental market was a predictable occurrence, although it happened quickly. 

Goodall said it is hard to establish whether accidental landlords had bought new homes and failed to sell their old ones, or whether they were simply investors who wanted to divest at the peak of the market and failed to.

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