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70% drop in available rental properties; median rent up to record level

News from Trade Me
Wellington tenants are being asked to dig deep after the capital’s median weekly rent jumped 6.7 per cent to a record-equalling $480 in the year to December, according to the latest Trade Me Property Rental Index.

Head of Trade Me Property Nigel Jeffries said the demand in Wellington was “massive” with the number of available rentals* dropping 70 per cent in the year. “The capital is bearing the brunt of the rental shortage and January is likely to be even more extreme.

“Since October, the median weekly rent in Wellington has increased $30, from $450 to $480 in December to match the record set in January 2017. We expect to see a new record price in January as the influx of university students heats the market even further.”

Mr Jeffries said the rent spike is driven by a combination of factors including a lack of housing, first time buyers staying in their rentals longer while they save a deposit and the influx of people coming into Wellington. “There’s also an argument that the government’s increase of the student allowance has been a contributing factor. I’m not so sure that’s having an impact this is a simple supply and demand equation – demand is far outstripping supply and the market is reacting with higher rents.

“Also, for the most part, landlords know that getting a good tenant is far more important than getting the highest possible rent. They want a reliable, honest and conscientious tenant to ensure their investment is looked after.”

Mr Jeffries said an example of the demand Trade Me Property was seeing was a two-bedroom rental property in Wellington which was listed for just 25 hours before it was taken down due to a deluge of over 55 applications.

Demand high across the country
Mr Jeffries said that fierce demand for rentals was being seen all over the country, not just Wellington. “Nationwide the number of available rentals* has halved since December 2016, falling 49 per cent with the median weekly rent rising 2.2 per cent to $460 per week.

“While it is common for us to see the median rent increase in December, it doesn’t usually increase this much. The market is much tighter than usual and it is highly likely that tenants will be asked for record rents in January and February all over the country.”

Available rentals in Auckland falls 35 per cent
Mr Jeffries said the number of available rentals* in Auckland was down 35 per cent on December 2016 with rental properties coming on and off the market rapidly.

“Typically we see the median weekly rent in Auckland take a slight dip between November and December however, this year rent remained steady and unchanged on November at $530 per week,” he said.

“We could see a new record in January, I wouldn’t be surprised to see rents break $550 by the end of summer.”

Christchurch rental market stable
Mr Jeffries said that the Christchurch rental market was bucking the national trend after it stabilised in December. The median rent was up a miniscule 0.3 per cent on December 2016 from $399 to $400 per week.

“While the number of available rentals* in the Garden City was down 60 per cent on the year prior, available stock levels in December were similar to what we have seen in previous years and pre-earthquakes, which explains why we haven’t seen the rent rises we would expect,” he added.

Rent rises in the regions
Mr Jeffries said every region’s median weekly rent was up year-on-year in December except Taranaki and the West Coast which remained unchanged. “Northland and Marlborough were the star performers in December after both regions climbed more that 12 per cent on December 2016 to $395 and $423 per week respectively.

“Landlords in Nelson also have plenty of reasons to smile this month after the median weekly rent rose 9 per cent to end the year on a record at $420,” he added.

Small houses reach record high
The median weekly rent for small houses (1-2 bedrooms) reached a new high in December, rising 8.6 per cent year-on-year to $380 per week.

“This rise has been largely driven by small houses in Wellington which grew 11.4 per cent to a median weekly rent of $390.”

Mr Jeffries said large houses (5+ bedrooms) in Wellington also gained momentum in December, jumping 12.8 per cent on December 2016 to reach a record median weekly rent of $1,100.

Predictions for 2018
Mr Jeffries said that tenants are going to continue to be under pressure in 2018 as the rental market tightens. “Overall, the shortage of rental properties isn’t going to get easier anytime soon. Demand will continue to exceed supply this year and as a result we are predicting that the national median weekly rent will rise between 3 and 5 per cent.

“We also expect that the Healthy Homes Guarantee Act may pressure some property investors to sell up rather than deal with the additional costs required to get their property up to standard. While this new policy will mean drier and healthier homes for some, this will likely contribute to the current rental shortage,” he added.