Rental prices have dropped year-over-year for the first time since late 2009, according to property research firm Cotality.
The most recent data reference a Ministry of Business, Innovation and Employment update indicating that national median rents for the three months ending in May fell by 0.3% compared to the same period last year.
“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,” Cotality chief economist Kelvin Davidson said.
Auckland and Wellington saw more major declines, with Auckland’s rents falling by nearly 2% compared to the previous year.
Meanwhile, Dunedin saw notable rental growth, rising close to 10%, while Hamilton’s rents increased at a more modest pace, up by roughly 4%.
“I’m not saying it’s easy to be a tenant by any means, but the growth rate has petered out,” Davidson said. “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 noted that a shift in the rental market, with a larger number of smaller properties entering the market, could have contributed to the decline.
However, Davidson also acknowledged that this factor alone wouldn’t fully explain the overall drop.
He said there shouldn’t be an expectation of ongoing rent declines over the long term: “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.”
The data also revealed a 0.2% rise in house prices in June, although they declined by 0.1% over the past three months.