Will Hawke’s Bay rents drop due to interest rate cuts? Investor who owns 45 homes says no

Graeme Fowler has a large property portfolio in Hawke's Bay. Photo / Supplied

A Hawke’s Bay property investor says landlords are unlikely to start lowering rents to match a dip in interest rates because rent prices are mainly set by demand.

And Graeme Fowler says demand remains “extremely high” in the region, with in some cases more than 50 people applying for a single rental in Hawke’s Bay when one becomes available.

The official cash rate (OCR) was cut by the Reserve Bank for the second time in the space of two months on Wednesday.

In response, banks are lowering their interest rates - with some mortgage rates now below 6% after years of steady increases.

Graeme Fowler has a portfolio of about 45 homes and eight commercial properties, most of which are located in the region.

Fowler said it was good to see mortgage rates coming down to give homeowners respite on their mortgage repayments, although that could be one, two or three years away for many people on fixed terms.

For landlords, he said it was unlikely to translate to rents being lowered.

“Just because interest rates come down doesn’t mean [a landlord] is going to put the rent down. It is supply and demand,” he said.

“If 100 people apply for a rental and you have it at $550, why would you advertise it at $500?”

He said he followed the advice of his property manager in setting rents and was working to pay down debt on his property portfolio.

“I have all mine managed, and I go by what the property manager suggests, but our [rentals] are slightly lower than what the average is maybe by 5% or so, I would say.”

He said demand was determined by a number of factors, and he did not foresee it lessening significantly any time soon, at least in Hawke’s Bay.

Rental houses in Napier (pictured) and across Hawke's Bay are unlikely to become cheaper as mortgage rates fall, local property investor Graeme Fowler says. Photo / Warren Buckland

“When one of mine comes up for rent, there are at least 50 people applying, so there is never any time where it is vacant for more than a week or two.

“I don’t know what it is like outside [Hawke’s Bay], but here the demand is still extremely high.”

According to Trade Me Property’s latest figures, Auckland ($675) and Bay of Plenty ($670) are the top two most expensive regions to rent in, with Wellington, Hawke’s Bay and Otago sharing the third spot, with the median rent sitting at $650 per week.

Nationwide, Trade Me Property reported rental demand had been falling, dropping 36% from August 2023 to August 2024.

Fowler said the situation was becoming more attractive for investors to buy rentals.

“House prices have come down quite a bit over the past two or three years but interest rates counteracted that by going up.

“So by them coming down, and with house prices still down, it is making it more attractive for investors.”

Fowler, who is the author of 20 Rental Properties in One Year, is not interested in buying more properties himself. He wants to pay off debt to get his portfolio mortgage-free, including selling some homes.

“The idea is to have no debt and not be concerned about interest rates.”

Gary Hamilton-Irvine is a Hawke’s Bay-based reporter who covers a range of news topics including business, councils, breaking news and cyclone recovery. He formerly worked at News Corp Australia.