Kiwis are spending so much of their income on rents, we’ve earned an unwelcome top spot; the Government plans next year to reverse Labour’s tenancy law changes; how long will Kiwi Property’s new Resido take to fill up? And when might Barfoot & Thompson’s for-sale Auckland housing stock break the
Property Insider: NZ tops OECD rent chart; tenancy law changes next year; Resido – patience encouraged
New Zealand has been found to top the OECD when it comes to the portion of income spent on rent. Photo / Thomas Winz
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Of those who rent, one-in-four Kiwis spend 40 per cent or more of their disposable income on rent. That’s ahead of the British where 22 per cent of renters spend more than 40 per cent of their disposable income and the Spanish at 20 per cent.
“Across the rich world – from America to New Zealand – millions spend more than a third of their disposable income on rent. The squeeze extends from social democracies that prize strong tenancy rights to Anglophone countries that prefer home ownership – and it is mostly getting worse,” the May 30 edition of The Economist said.
The article “Is your rent ever going to fall?” looked in-depth at the effects of rent controls in Sweden, where a powerful tenants’ union negotiates with landlords to hold rents as much as 50 per cent below the market.
The effect? A massive shortage of rental properties.
“Lots of people lose out,” the magazine said, because the average wait for a rental apartment in Stockholm’s central city area is 20 years.
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Those lucky enough to have a place refuse to move.
So rent controls can actually have the opposite of the intended effect: instead of easing tenants’ burdens, they can make them heavier.
The Economist didn’t mention this but in New Zealand, lobby group Renters United and the Green Party also want rent controls.
Renters United has called the controls “an urgent measure to reduce the stress that too many New Zealanders face due to exorbitant and unjustified rent increases”.
The group adds: “For the last 10 years, rent prices have been increasing faster than incomes. That means rent makes up a larger portion of renters’ incomes, making escaping the broken rental market harder than ever.”
Auckland Council says rents have outstripped wage and salary growth, straining the budgets of many families and households. This caused more housing stress, and homelessness.
“House price and rent increases also mean some households find themselves in unsuitable accommodation. Some live far from jobs, schools and other facilities due to limited availability of affordable options. This trade-off between the cost of housing and proximity to jobs and facilities is a driver of spatial inequalities and social exclusion in Auckland,” the council says.
Tenancy law to change next year
New Zealand’s coalition Government has vowed to make it easier to evict tenants, although Housing Minister Chris Bishop puts it as removing “barriers to increasing private rental housing supply, as well as [to] introduce pet bond provisions”.
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On May 21, Bishop said the reforms had passed their first reading. The changes include:
- Reintroducing landlords’ ability to give notice to end a fixed-term tenancy at the end of the term without requiring a specific reason;
- Reintroducing 90-day “no cause” terminations for periodic tenancies, meaning landlords can end a periodic tenancy without requiring a specific reason;
- Introducing pet bonds, set at a maximum of two weeks’ rent, that can be charged in addition to the existing bond when a tenant wants to have a pet; providing that tenants may only have a pet or pets with the consent of the landlord, who can only withhold consent on reasonable grounds;
- Making tenants liable for all pet damage to properties beyond fair wear and tear.
The Government expects most of these changes to come into effect in early 2025, with the pet changes coming once the bond system has been updated, expected to be later in 2025.
The coalition Government’s Residential Tenancies Amendment Bill was last month referred to the Social Services and Community Committee, where people are invited to make submissions.
The Economist cited research by the University of Auckland’s Associate Professor Ryan Greenaway-McGrevy, who found that 2016 Auckland Unitary Plan up-zoning precipitated a boom in housing construction.
All those extra homes held rents almost 30 per cent below where they would otherwise have been, he found.
Greenaway-McGrevy of the economics department told Property Insider he also noted research by Auckland Council chief economist Gary Blick provided compelling evidence that up-zoning had increased Auckland’s housing supply and led to lower rents, compared to a scenario where it was never introduced.
Greenaway-McGrevy has written two papers:
- Can zoning reform reduce housing costs? Evidence from rents in Auckland by Greenaway-McGrevy and Yun So, March 2024;
- Can zoning reform increase housing construction? Evidence from Auckland by Greenaway-McGrevy, September 2023.
Housing costs in New Zealand are among the most expensive in the developed world, the research showed.
Among renters and owner-occupiers with a mortgage, the median proportion of disposable income (i.e. after taxes and transfers) spent on housing costs was 22 per cent in 2021, exceeded only by Australia, Greece and France in the OECD.
Among renting households, the median proportion is 28 per cent. As of the 2018 Census, over a third (35.5 per cent) of households are tenants. This figure is higher for Auckland, where more than two-fifths (40.6 per cent) of households rent as of 2018, Greenaway-McGrevy found.
Census 2023 had new data on the number of rental properties and dwellings overall.
Resido – just be patient?
When it comes to New Zealand’s biggest new build-to-rent project, patience, it seems, is a virtue. It could take 12 to 18 months to lease all 295 apartments, if experience in Australia is anything to go by.
Kiwi Property Group last Tuesday had Prime Minister Christopher Luxon and Housing Minister Chris Bishop open the three-tower block, which is this country’s largest build-to-rent (BTR) project.
Building C, the final of three blocks, only reached practical completion on June 4, a Kiwi spokesman said.
“Already successful overseas, build-to-rent is one of the largest property asset classes in the United States, and growing rapidly in markets like the UK and Australia,” he said.
“Resido isn’t just for Millennials and Gen Zers though, offering down-sizers and retirees an alternative to the responsibilities of home ownership, in favour of a relaxed, carefree lifestyle.”
Rain didn’t dampen enthusiasm at the opening, attended by Property Council chief executive Leonie Freeman and members of Kiwi’s board, including Peter Alexander, who is also on the Smith & Caughey’s board.
Kiwi CEO Clive Mackenzie described the opening as a milestone for the company.
Luxon called Resido New Zealand’s biggest BTR but Shane Brealey of Simplicity Living said afterwards the under-construction Te Reiputa further down Mt Wellington Highway would be larger once finished, at 297 units.
Luxon also mistakenly said Resido was New Zealand’s first BTR project but companies like New Ground Capital might beg to differ.
Climbing Auckland residential listings
Will Auckland’s biggest real estate agency soon have 6000 homes for sale? That could happen if people keep listing places – and holding off buying – at the current rate.
Barfoot & Thompson data showed in January the agency had 4618 available listings at the end of the month, rising to 5382 by February, 5741 by March, 5770 by April and 5763 last month. A decade ago, the agency had only 3034 properties for sale at this time of the year.
So numbers are up 89 per cent from May 2013 to May 2024.
It can’t be an easy time for some homeowners wanting to sell, especially those who are under pressure, have a place listed in this city and can’t get the buyers.
At least sales rose from April’s 704 unconditional commission-paid deals to May’s 916 unconditional commission-paid sales, although average prices fell from $1.2 million to $1.1m in the same period, the agency’s data showed.
Let’s be cheerful: the shortest day is later this month, so we may turn a corner then.
The latest QV House Price Index out on Friday showed home values decreased by an average of 0.2 per cent nationally over the three months to the end of May, down slightly from the 0.1 per cent quarterly growth reported for April, with the average value now sitting at $923,713.
That figure is 3.9 per cent higher than the same time last year and 13.2 per cent or $140,052 lower than its peak in late 2021, QV found.
Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.
