How long will better times for renters last?

More than 7000 rental listings were added to the realestate.co.nz website in May.
Photo:
RNZ
Good news for renters - rents are predicted to remain subdued until well into next year.
Realestate.co.nz said renters were, on average, $1400 a year better off this year than last, because asking rents were falling.
The average rent being asked across the country in May was $633 per week, a drop of $27, compared to the same time in 2024.
That was also the lowest price since December 2023.
Realestate.co.nz spokesperson Vanessa Williams said demand had slowed at the same time that more listings had come to the market.
For the first time in almost a decade, more than 7000 rental listings were added to the site in May, a 21.3 percent increase from the same time last year.
The biggest increase was in Wellington, up 87 percent year-on-year.
"While interest rates are coming down, we haven't seen growth in the sale market," she said. "There's an element of investors not bringing property to market, which can be snapped by first-home buyers.
"The lower end of the market isn't being transacted as much. We haven't seen any growth in property prices for the last well over two-and-a-half years.
"That's an element that's happening."
She said another aspect of reduced demand was that cost-of-living challenges kept people living with their parents longer and also leaving the country.
She expected the for-sale market to pick up in spring, which could mean more investors took their properties out of the rental pool to try to sell them, but she said that was unlikely to feed through to change in the rental market before the end of the year.
Infometrics chief forecaster Gareth Kiernan said the market could stay in tenants' favour even longer.
"Rental growth could remain subdued for another 12-18 months," he said. "Factors likely to limit rental inflation during the rest of 2025 and into 2026 include slower population growth and lower net migration, as well as modest household income growth and the potentially patchy economic recovery.
"Nevertheless, if the labour market begins to gradually recover during the second half of this year, it should help limit some of the downward pressure on rents that we have seen over the last year."
He said lower mortgage rates and the reversal of Labour's less favourable tax rules around investment property were likely to limit the upward pressure on rents due to landlords' rising costs.
"Demand tends to be the primary driver of rents and landlords will charge what the market can bear. In other words, there looks likely to be a measure of consistency between limited cost pressures and modest demand for rental accommodation over the next few quarters."
Cotality chief economist Kelvin Davidson said there had previously been a "big boom" in rents and the ratio of rent to income was at record highs.
"Rents are already pretty stretched, which limits the scope for growth, and it makes sense it's slowed down."
He agreed a drop in migration also reduced demand.
"That's previously been a big driver of it, people wanting to come into the country, but that's really tailed off."
Developers were also renting some newly built properties rather than selling them.
He said tenants wouldn't have to worry about rapid rent increases for some time.
"Unless we get a lot of wage growth, which doesn't seem likely… there's that restraint on tenant affordability."
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