Rents Fall For First Time Since 2009
Rents have fallen on an annual basis for the first time since late 2009, property research firm Cotality says.
Its latest data points to an update from the Ministry of Business, Innovation and Employment, which showed national median rents in the three months to May were down 0.3 percent from the year before.
It follows reports of drops in the price being asked for advertised rental properties.
Cotality chief economist Kelvin Davidson said it was a notable change after big rental increases between 2021 and 2023.
"I think it's quite significant. There aren't many periods in the past where rents have fallen. The latest numbers are only down slightly but you have to go back to 2009 to find a period where annual rental growth on these numbers has been negative and before that it was the late 1990s. So around the Asian financial crisis and the GFC."
He said it showed a shift in the market.
Auckland and Wellington had experienced bigger drops. Auckland's rents were down almost 2 percent year-on-year.
Dunedin experienced strong rental growth, up almost 10 percent. Hamilton's were also up, but only about 4 percent.
"I'm not saying it's easy to be a tenant by any means but the growth rate has petered out. That's consistent with the fact that rents are already high. That's a natural handbrake on any further growth, as well as migration coming down to reduce the marginal extra demand for property. And of course more listings on the market too."
He said a change in the composition of the rental market, with more, smaller, properties coming on to the market could have influenced the drop but would not be the full story.
Davidson said it should not be expected that rents were going to decline steadily for a long period of time.
"What's more likely is that you get a long flat patch and that's how the rental market tends to adjust, the rents go flat for a while and affordability is improved by incomes going up.
"Of course the flipside is for landlords there's going to be continued challenges in terms of getting rental increases through if that's what they're looking to do."
The data showed house price values nationwide increased 0.2 percent in June but were down 0.1 percent over three months,
In the 12 months to June, 85,951 properties changed hands.
The average gross rental yield now stand at 3.8 percent, which is the highest level since mid-2016. This measures rental income as a proportion of the value of property.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
NZ Herald
21 hours ago
- NZ Herald
Housing market recovery delayed despite rising sales volumes
Cotality (formerly known as CoreLogic and one of the foremost authorities on the housing market) recently noted that volumes have been gradually rising for about two years. It points out that the rise in May activity pushed sales levels to 5% above anything we've seen at that point in the year since 2016. On that basis, the slump looks to be behind us, but we haven't seen a recovery on the pricing front. The REINZ house price index (HPI) has fallen for six out of the past seven months. Nationwide prices are unchanged over the past 12 months and still 16.3% below the peak in late 2021. That's not the case everywhere, of course. The South Island has performed much more strongly, with Canterbury, Otago and Southland more buoyant and all within 5% of the peak. The impact of a solid agricultural sector is likely to be part of the reason for that. In contrast, Auckland and Wellington have struggled and are still more than 20% below the heady levels of a few years ago. The median number of days to sell is also elevated, reflecting a sluggish market in which properties sit unsold for longer. It rose to 50 days in June, and has averaged 47 in the past 12 months. That's the highest since mid-2023, when interest rates were rising quickly and the economy was in recession. Excluding that period, it's the highest since 2008 and 2009, during the Global Financial Crisis. There are numerous reasons to explain our underperforming housing market. For a start, affordability is still awful. Prices have been flat for two years, having fallen almost 20% from the peak before that. However, the rise during 2020 and 2021 was so dramatic (48% in less than two years) that, even after the multi-year slump, prices are still more than 20% above pre-Covid levels. That boom was primarily driven by ultra-low borrowing costs, with the one-year mortgage rate falling to 2.2%. In data going back to the early 1960s, there's never been a time when interest rates have come close to being that low, and we might not see them again in our lifetime. Many would argue that prices were pumped up so much during that period that they might need to fall further (or at least languish for a little longer) for reality to catch up. Other costs of home ownership – such as rates, insurance and maintenance – have also increased sharply, while the policy backdrop hasn't been friendly to investors. Net migration has declined much more than expected, after hitting record highs in 2023. To use a technical phrase, it's fallen off a cliff. New migrant numbers (of working age) were comfortably above 100,000 a year 18 months ago, but they've dropped to fewer than 10,000 today. Apart from the Covid-era when the borders were closed, that's the lowest since the 2010-13 period, and before that 2000-01. For many of those who are still here, job security is a concern. The unemployment rate has been steadily increasing for three years, and it's sitting at 5.1%. Apart from one quarter during the unusual Covid period, that's the highest in more than eight years. People are reluctant to make major financial commitments when they don't feel completely safe in their jobs. Unemployment is expected to push a little higher, so a shift in sentiment could be unlikely until late this year or into next year. Nobody can accurately say where house prices will go from here. Plenty of people incorrectly predicted declines in early 2020, and just as many expected a recovery to be under way by now. Reserve Bank forecasts suggest prices will grow by 4.2% annually over the coming three years. That's below the long-term average (which has been 5.7% since 1990) but it's slightly above inflation, GDP and population growth expectations. All these headwinds, as well as a high number of listings, have swung the power balance in favour of buyers, including those looking for a first home. That's unlikely to change in the near term, which is good news in many ways. I'm not sure if any of us should be hoping for another boom. A stable-but-sluggish period for house prices could be a more desirable outcome for the economy, and society overall. For the first time in a long while, the housing market is working more for buyers than sellers, and that rebalancing might be exactly what we need. Mark Lister is investment director at Craigs Investment Partners. The information in this article is provided for information only, is intended to be general in nature, and does not take into account your financial situation, objectives, goals, or risk tolerance. Before making any investment decision, Craigs Investment Partners recommends you contact an investment adviser.
RNZ News
3 days ago
- RNZ News
More being priced out of Dunedin rental homes, says charity head
First published on By Laine Priestley , Otago Daily Times Salvation Army Dunedin community ministries manager Captain Logan Bathurst. Photo: Otago Daily Times / Tracie Barret Climbing rents have brought housing insecurity in Dunedin close to a "tipping point", a charity leader says. Salvation Army Dunedin community ministries manager Captain Logan Bathurst made the statement after statistics released by Cotality showed rents had climbed by almost 9 percent in the year to May. Bathurst said the numbers tracked with the struggles he was seeing. He said more people in Dunedin had been priced out of rentals over the past 12 months. "I'd say it is getting worse. I think we're close to tipping point ... I don't think much is being done about it, to be honest. "It's lots of talk, but no real action at the moment." He believed people elsewhere in New Zealand were still struggling, despite the numbers showing rental prices were going down. Housing prices were still taking up a large portion of people's income, he said. "The amount ... is still huge - yes, around the country it has come down, but it is still a significant portion. "Energy costs and power costs have gone up as well over the last 12 months, so even if there is a saving in terms of accommodation, there's still higher costs of just cost of life and living." Cotality's report came from an update from the Ministry of Business, Innovation and Employment, which showed national median rents in the three months to May were down 0.3 percent from the year before. However, Dunedin was an outlier with an 8.7 percent rise. Cotality chief economist Kelvin Davidson said there was a sharp rise in rents post-Covid as borders reopened and net migration spiked. At the same time, rental supply was tighter, and investor activity dipped due to rising mortgage rates and tax rule changes. "This affordability ceiling is now acting as a natural brake on further rent increases." This story was first published by the Otago Daily Times .
Scoop
4 days ago
- Scoop
Rents Fall For First Time Since 2009
, Money Correspondent Rents have fallen on an annual basis for the first time since late 2009, property research firm Cotality says. Its latest data points to an update from the Ministry of Business, Innovation and Employment, which showed national median rents in the three months to May were down 0.3 percent from the year before. It follows reports of drops in the price being asked for advertised rental properties. Cotality chief economist Kelvin Davidson said it was a notable change after big rental increases between 2021 and 2023. "I think it's quite significant. There aren't many periods in the past where rents have fallen. The latest numbers are only down slightly but you have to go back to 2009 to find a period where annual rental growth on these numbers has been negative and before that it was the late 1990s. So around the Asian financial crisis and the GFC." He said it showed a shift in the market. Auckland and Wellington had experienced bigger drops. Auckland's rents were down almost 2 percent year-on-year. Dunedin experienced strong rental growth, up almost 10 percent. Hamilton's were also up, but only about 4 percent. "I'm not saying it's easy to be a tenant by any means but the growth rate has petered out. That's consistent with the fact that rents are already high. That's a natural handbrake on any further growth, as well as migration coming down to reduce the marginal extra demand for property. And of course more listings on the market too." He said a change in the composition of the rental market, with more, smaller, properties coming on to the market could have influenced the drop but would not be the full story. Davidson said it should not be expected that rents were going to decline steadily for a long period of time. "What's more likely is that you get a long flat patch and that's how the rental market tends to adjust, the rents go flat for a while and affordability is improved by incomes going up. "Of course the flipside is for landlords there's going to be continued challenges in terms of getting rental increases through if that's what they're looking to do." The data showed house price values nationwide increased 0.2 percent in June but were down 0.1 percent over three months, In the 12 months to June, 85,951 properties changed hands. The average gross rental yield now stand at 3.8 percent, which is the highest level since mid-2016. This measures rental income as a proportion of the value of property.
