OPINION: For the fifth straight year, the rate of increase in residential rents nationally will be less than the rate of inflation.

According to a survey undertaken by the Ministry of Housing and Urban Development, at the end of July the annual rate of rent increase nationally was minus 0.1% while Stats NZ has the current rate of inflation tracking at 2.7%.

If economic settings stay the same for the remainder of the year, it means rental inflation will come in at comfortably 2.8% under the rate of inflation.

In 2024 inflation exceeded rental increase by 1.2%, in 2023 by 0.2% and in 2022 by 2%.

While these margins range from modest to impressive all are nevertheless a welcome statistic for the estimated 500,000 households that rent their accommodation from the private sector, and gains that do make a contribution to easing pressure on the weekly household budget.

It is a statistic few would have forecast in the first decade of the 2000s when rental accommodation demand exceeded supply and rent increases exceeded inflation rates.

Even fewer seem aware of this important economic indicator, and it is rarely commented on.

As with the effort to reign in house price increases, the key to calming rental increases was getting on even terms with the demand for rental accommodation.

A major contributor to meeting demand has been the number of new builds reaching the housing market in the under $1 million price category.

Key factors that are affecting rental prices include:

• Town houses and apartments at under $1 million proving attractive to investors keen to make property part of their overall savings portfolio, increasing the supply and quality of rental accommodation

• Some developers that are unable to achieve their desired price for completed houses opting to rent them out rather than leaving them sitting empty until market prices improve and

•  Landlords taking the realistic attitude that a good tenant at an existing rental is worth retaining and reigning in their return expectations.

There are some subtle but growing trends occurring in the rental market in our bigger cities that are changing perceptions around renting.

First, the overall quality of rentals is gradually improving, brought about in part by the requirements of the Healthy Homes Standards, but also the need for the current rental stock to compete against the quality and attractiveness of the new builds reaching the market.

Secondly, particularly in the Auckland market, renting is increasing in appeal. For many, renting is a lifestyle decision, an option offering flexibility to be more mobile; to spend less or the same on better accommodation; or live closer to work and leisure pursuits.

This trend is in line with what occurs overseas, particularly as cities reach such a size that travelling to and from the central business district daily consumes more too time.

As renting grows in popularity it is likely the rental market will have to adapt to offer tenants longer and greater security of tenure.

Property management is a significant part of our business, and we manage more than 21,000 properties on behalf of landlords. Through our daily interaction with landlords and tenants we have a good insight into the issues and wants both parties are looking for.

Landlords ‘needs’ can be summed up as long-term tenants that pay their rent, respecting the property, look to get issues fixed before they became major and respect for the rights of their neighbours.

In turn, tenants want to pay a fair rent and landlords that are approachable, deal with issues promptly, maintain the property to an acceptable standard and give them the freedom to make the place homely.

For a growing number of tenants, pets are now ‘family members’ and are deal breakers.

Invariably, most landlords and tenants are not looking for any more than what they would expect if their situations were reversed.

Such needs and wants are not hard to meet.

Peter Thompson

Managing Director, Barfoot & Thompson

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