Council rates rises blamed for rocketing rents around NZ

By Susan Edmunds of RNZ

Big increases in council rates may be contributing to a rent crunch in some parts of the country.

Data from CoreLogic shows the regions with the largest increase in rent since the end of the Covid freeze in 2020.

Ōakura, New Plymouth, is top of the list with an increase of 68% compared to September 2020. It is followed by Marfell, in the same area, at 67%. Westmorland, Christchurch, is third at 66% and Lower Shotover, Queenstown, at 64%.

Kiwibank economist Sabrina Delgado said there was a “very strong theme” of council rates rises being passed through to higher rents.

“Ōakura was one of the suburbs which saw an over 20% increase in council rates last year while Marfell saw a 17% increase in rates.”

Three other New Plymouth suburbs also featured in the top 10.

For the 12 months to the March quarter, property rates were up 9.6% on a national basis, according to the consumer price index. Rents were up 4.6% year-on-year in May, on Stats NZ’s stock measure, which includes all tenancies, and 3.8% by the flow measure, which covers new ones.

Delgado said Queenstown would have been boosted by the return of tourism.

“Looking at population growth, Otago’s population as a whole grew the most – 3.3% – of any other region in New Zealand from 2021 to 2023. So likely seeing added demand for rentals causing a push up in prices in these Queenstown suburbs.”

CoreLogic head of research Nick Goodall said Queenstown was undersupplied. “That’s not helped by how many properties there are used for short-term accommodation, Airbnb, that restricts rental supply and means for long-term rentals there aren’t many and prices go up at a faster rate.”

He said the New Plymouth increases could be down to a lack of supply.

“Throughout 2021 and 2022 rental listing supply was very low, that reaffirms the point – very few properties were for rent so any rental that are there there’s strong demand for, which sees rental prices increase.”

He said a number of Wellington suburbs had very little rental growth over that same period of time.

“If you look at the Wellington rental supply, it hasn’t been quite as tight as Taranaki.”

Delgado said Auckland was still top-of-the-table for rents paid.

She said renters might soon see more increases coming through in areas where climate change risks were pushing up insurance costs.

One renter, who did not want to be identified, said rent had now risen to 50% of her before-tax salary.

“Rent is the thing that has killed my hopes and dreams of owning a home. It’s the thing that makes me deeply concerned for my retirement, and terrified I’ll be one of the homeless elderly.”

She said she was paying $31,000 a year, not including the cost of water or lawns, in Ōtaki.

“In all my 27 years of renting, I’ve not once had a rent decrease.”