Rental System is Not Broken
Today’s CoreLogic Market Pulse report shows that rents haven’t been outpacing property costs or people’s wages. The rental system is not broken as some have been vocally saying.
“Landlords are very aware that housing in New Zealand is expensive and the CoreLogic data shows that they are doing their best to keep rental price increases as low as possible. This is completely opposite to the commonly held view that rental property providers are profiting at the expense of tenants”, says Andrew King, Executive Officer of NZ Property Investors’ Federation (NZPIF)
The study looked at rental prices and the costs of providing a rental property from 2003 to 2017. Over that time ownership costs increased by an average 5% per year while rents only increased by 4.4%.
The CoreLogic data also shows that rental prices have increased more or less at the same rate as incomes, showing that rental property owners are acutely aware of what their customers can afford.
Despite trying to keep rent increases to a minimum, many costs and regulatory changes have seen rental prices increase at a faster rate than general inflation over the last few years.
Combined with historically high levels of migration, this has put pressure on tenants, particularly low income tenants. The NZPIF supported increased assistance for beneficiaries and students introduced by the last government.
Despite calls that this assistance had merely inflated rental prices by the same amount and an opinion that it was actually increased subsidies for landlords, the evidence shows that this is not the case.
The NZPIF is pleased that many tenants have received extra assistance in excess of rental price increases. Our members have seen an increase in overcrowding which is not good for tenants or rental property owners.
However, while some tenants may now be in a position to afford better rental accommodation, there is currently a shortage of availability.
As long as many of the Government rental property proposals appear to be designed to reduce the number of people providing rental properties in a mistaken belief that it will help first home buyers, it is unlikely that tenants will be able to obtain the living conditions that they want.