Rents Rising in New Zealand

Regional areas of New Zealand are experiencing rents rising at record rates as the buoyant property market continues.

Following the latest figures reported this week from Real Estate Institute of New Zealand (REINZ) confirming that though sales volumes have fallen, property prices continue to rise, data from Infometrics on renting has shown that many regional areas are seeing rents rising at the fastest rate for a decade.

The data confirmed that though rental inflation had held steady at 4.7 per cent in the quarter to June – still a strong level of growth for overseas property investors’ yields – there were ‘contrasting regional trends hidden beneath this headline number’.

Infometrics chief forecaster Gareth Kiernan was surprised that rental growth was weakening in the North Island property market due to affordability and loan to value ratio restrictions on investors, as the undersupply of Auckland homes and ‘relatively strong’ population growth should underpin rental prices.

However, he said: ‘Around many other parts of the country, where the housing boom took longer to materialise, rental inflation is running at its fastest rates since the global financial crisis or earlier.’

Clutha, Gore, Gisborne, Hastings, the Kapiti Coast, Porirua and Upper Hutt had all recorded their fastest rental growth since at least 2008.

Gore rents rose about 12 per cent, while Kaikoura saw rents rising by as much as 18 per cent.

Mr Kiernan said: ‘Strong price growth in the latter part of the housing boom seems to be encouraging investors to re-evaluate their returns and put up rents if possible.’

The delayed pick-up in the housing market in other parts of the country was also showing through in rents elsewhere, as Rotorua, Wairoa, Tararua, Masterton, and Kaikoura all recorded their fastest rental growth on record, since 1994.

Overseas property investors looking for strong rental yields may want to consider regional areas in New Zealand with rents rising strongly.