Trade Me reports rising rents and hot demand for dwindling supply of rentals. Have Government rules had unintended, but entirely predictable, consequences?
Rising demand for rental properties across the country and falling numbers of properties available for rent is making it tough for tenants, according to the latest Trade Me Rental Price Index.
Head of Trade Me Rentals Aaron Clancy said they’d seen a 20% increase in the number of enquiries on rentals nationwide in June while the national median rent remained at its all-time high of $500 per week for a third consecutive month.
“We’re seeing an increasing interest for rentals but… the number of properties available for rent in June is down 7% on last year,” Clancy said.
“Unfortunately for anyone looking for a rental property, this is a perfect storm and as a result we’re seeing record rents, increased competition for properties and less stock.”
The regions experiencing the largest increases in demand are Bay of Plenty with the number of enquiries up a “staggering” 47% on last year. Enquiries in Southland have also jumped 45% along with Manawatu/Whanganui which rose 33% and Canterbury up 32%.
Mr Clancy said there is often a lag between an increase in demand and rising rents. If demand continues to outstrip supply, it’s likely we’ll see record-breaking rents for summer.
“With such high demand, rents have increased in many regions across New Zealand. In June, five regions saw strong double-digit growth and four reached new record rents. If demand continues like this we expect to see a lot more record rents over the coming months,” Clancy said.
Wellington rents rise $60 per week
Renting in Wellington continues to get more expensive with the median weekly rent rising $60 per week on last year to $540 in June.
Auckland rents expected to rocket
Auckland’s median weekly rent was $560 in June, up a modest 1.8% on last year. But the number of properties available to rent in the region was down 2.7% and the number of enquiries on rental properties rose a solid 21% on last year.
Mr Clancy said with demand rising in Auckland, he could see some large rent rises on the horizon.
The war on landlords
The Government upped its war on landlords with new loss ring-fencing legislation that ended the ability of rental property owners to claim losses against other income.
Good landlords can see the benefit of programs such as increased insulation standards, and heating and ventilation standards. But loss ring-fencing comes on top of increasingly anti-investor regulations and other difficulties facing residential property investors, including…
- Banning letting fees,
- Bright line test,
- Proposal to allow tenants to keep pets and make minor alterations to the building,
- Few consequences for tenants breaching tenancy agreements and causing damage, and
- The impunity with which tenants can escape unpaid rent.
The straw that broke the camel’s back
Loss ring-fencing could be the straw that broke the camel’s back. Inland Revenue has said that 116,000 owners declared an average loss of $137 a week. They are no longer able to offset that loss against other income.
Can the Government really be that unaware of the scale of the problem it is creating for renters?
Lacking in commercial acumen, the Government appears to be unaware that losses accrue in the early stages of a property investing career, and that as debt is reduced and income increases, investors become taxpayers, with some paying tens of thousands of dollars in tax each year.
Rental property owners who are losing money now face a choice… raise the rent, absorb the loss, or sell.
With rents at historic highs there is no ability to increase rents by $137 a week to cover the loss.
That means owners must choose between absorbing the loss or selling. Many are choosing to sell.
Whilst this is great for first home buyers, the reduction in supply means punishing times for renters, as evidenced by Trade Me’s latest report.
With more and more rental property owners selling, and the extended period of trading at a loss creating a barrier to new investors, the Government has just sped up the reduction of the supply of rental property.
The entirely inevitable will happen… rents and homelessness will both continue to increase.
What we are left with is a Government in denial that its policies to solve a housing crisis are making the crisis exponentially worse.