Renters in New Zealand are set to face easier times than those across the Tasman, a new rental report suggests.
By Susan Edmunds of RNZ
The latest Regional Rental Affordability Index released by property firm Property Brokers and The Property Knowledge, led by Professor Graham Squires, showed affordability had improved for nearly every region of New Zealand in the past year as rents eased and incomes rose.
Average rents now consume 39% of monthly earnings per job on a national basis, down 5% in a year. Most households pay rent with more than one income.
In Auckland, the figure is 39% in Wellington 35%, and in Canterbury 38%. The most affordable rent in the country is in the West Coast of the South Island, where rent of $433 a week would typically take up only 31% of an individual's income.
Hawkes Bay had the strongest improvement in affordability, up 9% year-on-year, as rents fell $53 a week. Wellington was just behind, down $42 a week.
The report said New Zealand's median rent burden as a share of disposable income was 25.5%, compared to 23% for Australia as a whole.
Property Brokers general manager of property management, David Faulkner, said New Zealand was closing the gap on Australia, and the two countries were heading in opposite direction.
Last year, Australian media reported that someone earning AU$100,000 a year would be spending 54% of their income on rent in the Gold Coast, 48% in Sydney, 43% in Perth, 38% in Melbourne and 35% in Adelaide.
Faulkner said there was a risk that recent Budget changes in Australia would drive up rents there.
"In New Zealand, we're seeing broad improvements in affordability, driven by easing rents and rising incomes. Australia, meanwhile, is heading into deeper rental stress, with rents rising faster than wages across both capital cities and regional markets.
"Policy settings matter. In New Zealand, the restoration of interest deductibility has coincided with softer rents and increased rental stock availability. Australia, meanwhile, is narrowing tax incentives for a significant portion of the investment market.
"While incentives remain in place for new-build investment properties, the removal of negative gearing on existing homes may reduce investor participation in parts of the market, potentially adding further pressure to rental supply. Over time, that has the potential to affect affordability outcomes for tenants."
Economists said it was not necessarily so clear-cut that interest deductibility had played a major part in rents falling here.
Simplicity chief economist Shamubeel Eaqub said there were a number of factors that drove rent, and it was determined more by tenants' ability to pay than by landlords' costs.
Infometrics chief forecaster Gareth Kiernan said mortgage numbers from the Reserve Bank did appear to show more investor appetite to buy property again from early 2024, when it was clear the interest deductibility and longer brightline test were going to be unwound.
But Faulkner said the Australian Government had not learned any lessons from New Zealand.
"Particularly around the interest deductibility, which I felt was a big mistake. Having that with rising interest rates, it puts a lot more pressure on landlords, and in turn, what eventually happens is that they look to pass on those costs, and that typically happens with rent increases, and you also see landlords forcing to sell, which reduces housing supply".
"In Australia, in the recent Budget, although there's differences in terms of the taxation, it's kind of the same thing, it's the same concept.
"They're trying to release housing stock for first-home buyers, but all it seems to do is reduce housing supply, and you're seeing upward pressure in rents in Australia, where ours seems to be going in the right direction, where rents are coming back in some places."
He said he expected New Zealand rents to stay soft.
"We've still got a wee bit for incomes to catch up, and supply to catch up as well. We're starting to see more stock come available, a lot of townhouses.
"People need to pay mortgages, so they'll rent these out, and so I think we're going to see about a three-to-four-year period of flat rents. That's my prediction."
Squires said the New Zealand's rental market was beginning to rebalance.
"New Zealand's rental affordability continues to improve, with easing rents and rising regional earnings reducing rent-to-income pressures across much of the country.
"This marks a clear shift toward a more balanced market, even though affordability remains tight in regions where supply constraints persist."
The morning's headlines in 90 seconds, including a dramatic police chase, and a footballer’s on-field collapse during an international match (Source: Breakfast)
SHARE ME