The Front Page: Economist Brad Olsen on why the rental market keeps tracking up

The cost of renting is starting to weigh heavily on Kiwi families. Photo / NZME

With rising interest rates and dropping house prices, most of our attention has been focused on New Zealand mortgage holders.

But we are also a nation of renters, with many Kiwis unable to get onto the property ladder.

Infometrics principal economist and chief executive Brad Olsen tells The Front Page podcast that homeownership rates have been declining in New Zealand for decades, meaning renters now make up a large portion of the population.

“We’re still seeing a very sustained level of rental price inflation,” says Olsen.

“Stats NZ data show that over the last year, rental prices have increased by around 4 per cent... [While] house prices have recently dropped, rents certainly haven’t. There’s been a continued level of pressure. If you’re trying to get a rental now, it’s still expensive.”

Olsen says this pricing pressure is coming through nationwide and is not limited to only the big cities, where there’s generally a high level of competition for the available housing stock.

“During parts of the pandemic when we saw fewer people coming from overseas, certainly fewer students, some of the rental figures in the urban centres, particularly Auckland and Wellington, didn’t seem to be going up as much. There were a few areas like the Auckland CBD where you could get some pretty good rental bargains here and there. But they’ve started to push back into that higher, rental growth territory and they’re back in line with some of the national figures.”

Olsen says there’s been a major uptick in demand all over the country.

“No matter where you are in the country, whether it’s Auckland or Hamilton, there has been demand for more places. The underlying trend is that rents are still going up. They’re certainly continuing to add pressure to people’s household budgets.”

Beyond these issues, there are also concerns that some landlords could be forced to leave the sector because of the pressures across the economy.

• So are landlords really fleeing?
• Why are rents still rising at such a rapid rate?
• Given rental inflation is even worse in Australia, should we view this as a warning sign?
• Are the existing rental rules sufficiently enforced to protect renters?
• Are politicians doing enough to make sure Kiwis have decent homes?
• Is there any hope of the long-term decline in homeownership numbers turning around?
• And do politicians care enough about renters given that they aren’t the key voting demographic?

Listen to the full episode of The Front Page podcast to hear Olsen elaborate on all these issues and more.

The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. It’s presented by Damien Venuto, an Auckland-based journalist, with a background in business reporting, who joined the Herald in 2017.

You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.