Infometrics says in Tauranga, an annual income of $95,160 was needed to afford $549 a week in rent. Photo / Getty
A shortage of rentals in Tauranga is driving up prices which are now at an "all-time high".
According to Trade Me, the number of rental properties available in Tauranga dropped by 37 per cent year on year last month, while demand increased 4 per cent. One agent says the number of available rentals has never been so low.
It comes after an Infometrics report showed the average Tauranga household has just enough income to afford the mean weekly rent.
The report looked at the average rental cost in the June 2021 quarter and calculated how much people needed to earn if 30 per cent of their income was spent on rent.
In Tauranga, an annual income of $95,160 was needed to afford the mean weekly rent of $549. The average household income in Tauranga was $95,106.
In the Western Bay, families had more than enough income to afford the average weekly rent of $477 at $82,738 a year. The average household income in the district was $124,684.
Infometrics senior economist Nick Brunsdon said average rents had grown 5 per cent in the past year nationally, reaching $480 per week in the June 2021 quarter.
He said growth was even faster in Tauranga with rents climbing 8 per cent to reach $549.
Brunsdon said internationally housing was considered affordable if it took no more than 30 per cent of a household's income to cover housing costs.
"In most parts of the country, average household incomes are more than enough to affordably cover average rents.
"Tauranga, however, is right on the line, with an average household income of $95,100 and a $95,200 income needed to affordably rent in the city."
Brunsdon said the household incomes were estimated by adding up all of the incomes in each area, including wages, salaries, self-employment, NZ Super, benefits, ACC, and so on, divided by the number of households.
There was likely more high-income households in Tauranga, as being a bigger centre there were more higher-paying jobs on offer.
"But this is counter-balanced by large numbers of retirees who may have fairly modest incomes.
"It's also worth bearing in mind that with expensive housing, people on lower incomes may form larger households to cover the cost – this could involve a couple bringing a boarder or ... multiple families under a single roof.
"In that case, you could have, say, three to four adults bringing in an income for the household, rather than one to two, and that can quickly add up to six figures even on low incomes but money could well be extremely tight."
Tauranga Property Investors Association president Juli Ann Tolley said it was not unexpected the average household had just enough to afford the mean rents.
However, she said owning a home was still more costly than renting.
The cost of owning property has gone up in correlation to significant increases in all the associated costs: Rates, insurance, maintenance, and the very beginning of rising interest rates.
"For rental property owners, they have had additional cost increases with compliance costs for the Healthy Homes standards and additional management costs.
"They have also lost taxable benefits through the ringfencing and soon the loss of interest deductibility.
"All these changes impact the operation costs of holding residential rental properties."
Tolley said Tauranga's rental market was "tight".
"In 11 years of tracking Trade Me listings, 2021 has recorded the lowest number of listings.
"Most rental listings have a high volume of applicants, but landlords are having to be far more selective due to the recent changes in the Residential Tenancies Act.
"If you get the wrong tenant who does not care about the property or suddenly stops paying rent, it is a very costly exercise to exit the tenancy."
There was still a lot of business and new people moving to the area to seek jobs, mostly from other city centres, like Auckland and Hamilton, she said.
"People are grouping together for rental arrangements more often now to share living costs, such as two couples or multi-generational families."
Tauranga Harcourts managing director Nigel Martin said the number of properties available for rent in Tauranga was at a "historically low" level.
"That is obviously putting pressure on rental prices.
"It's probably not until we have an increase in supply that we're really going to see any kind of levelling of those rents."
Martin said properties were being let reasonably quickly and there was still a "steady stream" of people moving into town.
"We're still getting people who are ex-pats coming back to New Zealand looking for properties to rent. A lot of people who are moving down here often rent first before they buy."
The managing director of the Realty Group Ltd, which operates Eves and Bayleys, Simon Anderson, said there were two sides to the story.
"Either our rents are too high or our wage levels are too low."
Anderson said the price of real estate in the city, due to its desirability, meant population growth has been "phenomenal" in the last few years.
"Therefore rents will be a bit higher than elsewhere," he said.
There was also a "real shortage" of rental property in Tauranga which was driving up prices, he said.
"We don't have a lot of available stock across our book and when something good comes up in a good location it's gone really quickly.
"There's still a huge number of applications for any rental place that comes up."
Trade Me's latest data showed the median weekly rent in Tauranga jumped 11 per cent year on year in July to an "all-time high" of $600. Region-wide it was $550.
Property sales director Gavin Lloyd said the number of rental properties in Tauranga dropped 37 per cent year on year last month, while demand increased 4 per cent.
Lloyd said supply was not keeping up with demand, resulting in rising rents and only time would tell what impact the level 4 lockdown had on the rental market.
"Last year after the nationwide lockdown, we saw the rental market heat back up quickly.
"After being stuck at home for alert level 4 last year, many tenants decided their rental wasn't up to scratch and we saw a flurry of activity in the market as soon as we moved down alert levels and things began to get back to normal.
"We're expecting a similar thing to happen after this lockdown ends."
Tauranga Budget Advisory Service manager Shirley McCombe said the majority of their clients had incomes that were a fraction of the average income.
"Accommodation supplements and core benefits don't come close to covering the cost of private rentals.
"It is a huge burden on families and even those with both partners working still struggle to cover the basics."
Tauranga:
Mean weekly rent: $549
Annual income to afford to rent: $95,160
Mean household income: $95,106
Western Bay of Plenty:
Mean weekly rent: $477
Annual income to afford to rent: $82,738
Mean household income: $124,684
Rotorua:
Mean weekly rent: $443
Annual income to afford to rent: $76,844
Mean household income: $103,049
Source: Infometrics
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