Median weekly rents fell from July to August to $635, according to Trade Me. Photo / Getty Images
A rental boss says a significant drop in rental prices is unlikely in Tauranga, despite notable falls elsewhere in the Bay of Plenty.
The latest Trade Me data shows Tauranga's rents dropped $5 - or 0.7 per cent - in August from $640, where it has been since May.
The slight drop comes after years of rising prices and a jump in the median weekly rent in the city of $140 in the past three years.
In contrast, the median weekly rent in the wider Bay of Plenty dropped $10 to $600 in August while in Rotorua it fell by $25 - or 4.5 per cent - from $545 in July.
Trade Me property sales director Gavin Lloyd attributed the drop to an increase in supply of rental homes.
Lloyd said supply jumped 35 per cent year-on-year in August, more than double the 15 per cent increase in demand.
"This increase in supply in the Bay of Plenty region is driving these price drops," Lloyd said.
"Prospective renters now have more options to choose from, which is taking some heat out of the market."
However, Dan Lusby, the owner of Tauranga Rentals Limited, said he did not see the regional trend of more rentals on offer reflected in the Tauranga market.
Rental listings had dropped in the past few months with their office having just three properties available for rent.
"We got up to 15 available but they still don't take long to go," Lusby said.
"We get a lot of inquiry from overseas people wanting to immigrate here. That is what is driving demand."
Lusby said smaller one- or two-bedroom homes were being rented, including tiny homes.
"There is a lot of demand there. A lot of single people don't need a big house to rent.
"We have two tiny homes being rented."
Prices were still increasing, with some rentals jumping between 8 to 10 per cent at their yearly review, he said.
"I don't know how some people can afford it sometimes."
Lusby said most people were staying put in their rentals and he believed it was because the Healthy Homes Standards had meant properties were better quality, warmer, and drier.
He said he did not see rental prices dropping any further as supply was continuing to fall.
"People will just put rents back up. It is at $640 now, but this time next year it will be $700."
Tauranga Property Investors Association spokeswoman Juli Anne Tolley said Tauranga rents between 2010 and 2014 decreased as the market was flooded with rentals under a suppressed market.
Rents crept up until 2018 when they started increasing at a more rapid pace as the property market heated up, she said.
"Over this latter period, law changes and Government market interference have increased costs of owning and maintaining a rental property," Tolley said.
"If costs go up, so do prices."
Tolley said investors had to either raise rents to cover the increased costs, sell, or absorb them.
"Even those who absorbed costs for a while are now finding they cannot do so any longer and are having to increase rent, and many circumstantial investors have exited the market and are continuing to do so now," Tolley said.
"I suspect this will continue at a steady pace as the removal of interest deductibility starts to have a real impact on the bottom lines of investors.
"Investing in property is a business, and investors provide a service: housing. But like all businesses, it must be profitable to be sustainable long-term."
Rotorua Property Investors Association president Sally Copeland said there had been a significant shift in the last 12 months in demand for rental properties.
"Last year it was usual to have 50 applications for one property, now it's more likely to be in the region of 20," Copeland said.
"I think property suppliers are very aware of the increase in costs of living and I have heard of our members not increasing rents for tenants who take care of their property and are up to date with rent payments."
Copeland said there were still a lot of people needing homes for long-term living arrangements and not enough supply.
"We need more homes to be built in Rotorua to keep up with demand."
Many landlords were choosing to place their properties with social housing providers to get the benefit of interest deductibility, she said.
"These houses will not be listed on Trade Me under rentals, however, they are increasing supply," Copeland said.
"There are a lot of people wanting to transition from emergency housing to a more long-term living solution, I would expect that this is keeping the number of applications high."
August
2019: $495
2020: $550
2021: $595
2022: $635
May $640
June $640
July $640
August $635
Bay of Plenty
August
2019: $480
2020: $525
2021: $560
2022: $600
Source: Trade Me