The quarterly fall of 0.9 per cent is the biggest drop over a three month period since the end of 2010. Video / NZ Herald
After years of rising rents, Bay tenants could see prices "tumble" if demand slips as more rentals are listed, a property expert predicts.
A drop in house sales is believed to be contributing to a rising supply of rentals as homeowners struggling to sell turn to renting their properties outinstead.
There are reports of rental prices falling in Rotorua but a Tauranga property manager says the bigger city is unlikely to follow suit unless its supply of rentals jumps by a fifth.
The latest Trade Me rents data shows the supply of rentals in the Bay of Plenty increased 3 per cent compared with May 2021, while demand dropped 8 per cent.
Trade Me Property sales director Gavin Lloyd said the trend could foreshadow a significant shift in the market, which has seen consistent price rises in recent years.
Tauranga's rents have increased by $140 on average in the five years since May 2018, while rents rose $170 in Rotorua and $130 in the wider Bay of Plenty.
Trade Me Property sales director Gavin Lloyd. Photo / Supplied
Lloyd said this could change if the trend of increasing supply and falling demand continued.
"We may well see prices tumble as landlords look to fill their rentals in a less competitive market."
Harcourts Tauranga managing director Nigel Martin said there had been good levels of demand and rental supply had increased.
"But there is no over-supply at the moment. The market is still very tight."
With more properties listed for sale and fewer selling, some unsuccessful sellers were renting their homes instead.
"If that continues, we may see a build-up of rental properties available and that could ... soften the rents.
"In order to see that eventuate, we would need the softening in the sales market to happen for a few months yet."
Tauranga Rentals owner Dan Lusby said, in his view, rental supply had to increase significantly to cause a fall in prices.
Tauranga Rentals owner Dan Lusby. Photo / George Novak
"There is no chance at all that is going to happen. Not unless we get an increase of 20 per cent and we are nowhere near that. I don't think we will ever get near that."
Lusby said 3 per cent more rental supply was still not enough to meet demand.
"All we are doing is catching up."
He attributed the rise to a "seasonal" winter shift as people were moving less due to Healthy Homes Standards improving the quality of rentals.
"That is helping people stay in one place."
Harcourts Tauranga managing director Nigel Martin. Photo / Supplied
In Rotorua, Professionals McDowell property management team leader Aisha Okeremi reported prices were falling in some areas and properties were taking longer to rent.
"Some properties and areas are seeing price reductions as landlords realise they are not being inundated with applications anymore."
Okeremi said those "overpricing" their rentals would find similar properties snapped up while theirs sat vacant.
"The market has been simply unaffordable for a long time now and tenants are becoming more cautious of taking on properties at prices they cannot sustain.
"The cost of living has blown up and tenants are taking the opportunity to be more selective of what they are getting for their money."
Okeremi said the Healthy Homes standards had shown tenants they should expect to live in warm, well-maintained properties and this was now what they were looking for.
"They are no longer just taking what they can get."
Okeremi expected prices to keep falling.
She said landlords did not usually drop rents based on market trends but if tenants started to relocate to chase cheaper rents landlords may be forced to lower prices to compete.
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Homeowners with larger portfolios were stepping back from buying new properties and instead were putting money into existing investments in a bid to keep good tenants paying current market rates, she said.
"We are seeing an influx in people who are struggling to sell turning to the rental market.
"Many are not willing to revisit their selling expectations so they are choosing to tenant them instead and either leave them on the market with tenants in place, or remove them altogether."
More tenants were willing to live in properties that were for sale, confident they would not have to be given notice soon, she said.
Tauranga Budget Advisory Services general manager Shirley McCombe said a drop in rental prices and more availability for the whānau it worked alongside would be welcomed.
"Many people are struggling with rent and others have agreed to properties they can't afford because they are frightened of being left homeless.
"We see clients who after paying rent have very little left for food or power, never mind insurance, doctor's visits, clothes and all the other things they need."
