Families are struggling to cover the cost of their weekly rents due to higher food and living costs, and the latest lockdown is adding another layer of uncertainty.
A shortage of stock is also putting pressure on weekly rents and seeing some rental agencies "flooded" with inquiries, rental agents say.
It comes despite new figures showing rents in Rotorua are "much more affordable" than some of the country's main centres, including Tauranga and Auckland.
Infometrics' latest 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 Rotorua, an annual income of $76,844 was sufficient to afford the mean weekly rent of $443. The average household income in Rotorua was $103,049.
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.
Rotorua's rents grew in line with the national average, up 5 per cent to $443.
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.
"Rotorua is much more affordable – average household incomes are $103,000 and $76,800 is needed for average rents to be affordable."
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.
"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."
Rotorua Rentals director Pauline Evans was amazed the figures showed the average household income in the city was more than enough to pay the mean weekly rent.
Evans considered the $103,049 average income only applied to employed, salary, and wage earners on fixed incomes as superannuates, beneficiaries, and those on sickness benefits were on a lot less.
"We are witnessing real-life struggles.
"Some are from personal poor choices made with little to no budgeting in mind. Other groups are struggling with higher food, petrol and living costs.
"Lockdown has added another layer of uncertainty to the situation."
Evans said Rotorua's rental market was undersupplied with high demand across most rent price ranges.
Rents were not skyrocketing but steadily increasing, she said.
"We are flooded with tenant inquiry, across rent ranges. Some applicants have bad debts and some have pets, they will struggle to find appropriate accommodation as owners are being more selective when choosing tenants.
"We seriously need more investors to be encouraged to enter the residential rental market, without more houses to offer we simply cannot house those who deserve a place to call home."
Rotorua Property Investors Association president Debbie Van Den Broek did not agree rents in the city were affordable.
Van Den Broek said, according to Trade Me, the cost to rent a one-bedroom home in Rotorua was between $290 and $500, $350 to $560 for a two-bedroom, $400 to $680 for a three-bedroom, $450 to $590 for a four-bedroom and $650 to $800 for a five-bedroom.
"People that rent one bedroom are likely not a family are they so it's not really fair to say you should live on about $440 a week rent because you're not going to find that for an average working family."
Meanwhile, she said some property managers and private landlords were getting inundated with applications.
"One lady I spoke to had 200 applicants ... It's really hard. I had another guy who had Airbnbs he is putting on the long-term rental market and he's been trying for three months to find a good tenant."
She said they were struggling to find suitable, reliable, and respectful tenants.
The managing director of the Realty Group Ltd, which operates Eves and Bayleys, Simon Anderson, said the figures meant it was about 15 per cent cheaper to rent in Rotorua than Tauranga.
Anderson said there was a shortage of rental stock in Rotorua and strong demand for investor properties.
First-home buyers were finding it more affordable and there was a "really strong" top end of the market in lake-view properties, he said.
"We're seeing a really strong Rotorua market driven by a lack of stock but there is also a lower end to that market as well."
Owners of investment properties want returns on their investments "so rents have to go up" as they spent more to comply with the latest legislation, he said.
"There is probably a bigger percentage of Rotorua rentals that need work on them ... therefore, stronger pressure and upward movement on prices there too."
Trade Me's latest data showed Rotorua's median weekly rent in July was $465, marking a 1 per cent increase compared to the same month last year. Region-wide it was $550.
Rental market supply dropped by 13 per cent in Rotorua in July compared with the same month in 2020. Demand, on the other hand, increased by 2 per cent year on year in July.
Property sales director Gavin 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, especially as we enter warmer months that are typically busier."
Rotorua:
Mean weekly rent: $443
Annual income to afford to rent: $76,844
Mean household income: $103,049
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
Source: Infometrics
Trade Me Property’s latest Rental Price Index is out.