Auckland University professor of urban planning Elham Bahmanteymouri explains why Kiwis have poured so much capital into housing, while other countries are content to rent.
Rental affordability is declining around the country, with even cheaper regions becoming less affordable, new Massey University research reveals.
There was a quarterly deterioration of 11.20 per cent in rental affordability at a national level, according to the university’s latest rental report.
It also showed six of the 16 regions had a decline in rental affordability over the March quarter of this year, when compared to the December quarter of last year.
Those regions were now rated as less affordable than the national average. They were Marlborough, Bay of Plenty, Auckland, Hawke’s Bay, Tasman, and Northland.
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The remaining 10 regions were all relatively more rent affordable than the national average, with two – Southland and the West Coast – standing out as being the most affordable for renters.
But the only region to show a slight improvement in affordability was the West Coast, with the other 15 regions all showing significant decreases in affordability.
National and regional affordability was calculated by dividing the respective average weekly wages into the respective mean rents.
Rents were up nationally by 4.8 per cent over the year to March, and this was reflected in rent increases in 12 of the regions.
The largest annual rent increases were in Hawke’s Bay (up 10.5 per cent), Manawatū-Whanganui (up 15.4 per cent), Southland (up 15.7 per cent) and Marlborough (up 11.3 per cent). Auckland had an increase of 5 per cent.
Massey University professor Graham Squires said the fact the West Coast and Southland had affordability below the national average was due to more favourable rental conditions relative to incomes.
But although Southland was one of the most affordable places for renters, the region had the largest yearly increase in rent prices, up 15.7 per cent to an average rent of $331 a week, he said.
“While this still pales in comparison to the most expensive city to rent, which is Auckland at an average of $564 per week, the relative change in Southland’s rent is significant.
“That’s because it shows the region is starting to play catch-up and highlights that the regions typically considered more affordable are becoming less affordable.”
Squires said there were a number of factors which were likely to affect rental prices around the country.
These included new government tax policies, which phased out the interest deductibility on rental property income and extended the bright-line test, and the end of the Covid-19 rent freeze in September last year.
The spectre of rent controls potentially being introduced might have led some landlords to believe that they had better raise the rent before it happened, he said.
“It’s like a perfect storm. With all of these forces at play, it is putting economic pressure on landlords to put up rents.”
The steep rise in house prices was connected to declining rental affordability too.
Squires said not only did price rises impact on the yields people wanted, but there was less stock available at the lower end of the market, and it was that stock which was traditionally used for rentals.
“There is an intersection between house prices and rents there, so when the government makes decisions in this area it needs to consider rental affordability and housing affordability at the same time.”
Trade Me Property’s latest rental price index, which was out Wednesday, also showed a widespread increase in rents.
It had the national median weekly rent up to an all-time high of $545 in June, which was a 7 per cent increase on the same time last year.