The pitfalls of fewer Kiwis owning homes and more renting

More of us are renting – and for longer. Data shows homeownership rates have fallen across New Zealand as residential rental numbers hit a record. One rental agency owner says renter demographics are also changing as more people can’t afford to buy a home. Reporter Carmen Hall speaks to tenants about the realities of life in the rental market.

A mother paying $750 a week for rent in Tauranga says she faces “fear and anxiety” every day that she will have to move out.

NZME spoke to her on the condition of anonymity because of health issues and she did not want to embarrass her family.

“Renting is horrible. I only got this house through a friend-of-a-friend days before nearly becoming homeless when my last tenancy ended.”

She said every time she reported an issue to her landlord she worried about being kicked out.

She was unable to work because of her health and was left with $150 a week to live on to cover power, Wifi, and food after rent.

“It’s really stressful. I’ve had to use the foodbank and I realise people who are working are still struggling so I’m grateful for the support I get. But it is still hard. Every day it is touch and go.”

Her comments come after it was revealed last week that New Zealand had a record number of residential rental properties.

Government Tenancy Services data showed a big upswing in the number of active rental bonds deposited.

That indicated more places were being rented.

By November 1 last year, bonds were lodged on 410,904 residential rental properties: townhouses, apartments, flats, units and standalone homes. That’s up 38 per cent from 2010.

The 2018 Census showed more than 1.4 million people lived in rental housing.

Meanwhile, Trade Me data released in January showed Bay of Plenty rents overtook Auckland’s in December to become the country’s priciest area for tenants with a median cost of $670 per week – $700 in Tauranga and $645 in Western Bay of Plenty.

Buying a home out of reach

Jayden Jarvis has accepted owning his own home in Tauranga is probably out of reach.

The 22-year-old father, who works in the hydraulic industry, said he was not overly fazed about whether he could ever afford to buy a home.

“I’d rather have a fun life and allow my kids to enjoy the good things in life rather than stressing about paying for a house first.

“In Tauranga, you are looking at least $750,000-plus for a decent house that isn’t run down and that is a lot of money for someone young like me and doesn’t have help or assistance from anyone financially.”

He was living in a three-bedroom home for $550 a week.

“I think that was a score considering how much some people want these days. I definitely plan to stay here.”

‘Fortunate’ to have a great landlord

A Tauranga landlord keeping his rent reasonable has helped his long-term tenants aspire to buy their own home.

Charles, who spoke to NZME on the condition his last name was not published, said he felt “lucky” to have a landlord who appreciated him and his family.

Their rent had increased only $50 over several years and was discounted for a period during Covid.

“We understand each other,” says Charles of his landlord. That included keeping the landlord abreast of maintenance issues and sorting some jobs like cleaning the gutters himself.

It was a welcome change from a previous “nightmare” landlord and Charles had friends who had never been in a rental more than a year as the house was sold or owners moved back in.

“I feel for them because it’s just so stressful.”

Homeownership was on the cards for Charles but he said “sky-high interest rates” were holding him back and he wanted to wait until the market settled. They had told the landlord of their plans.

Age demographics of renters changing

Tauranga Rentals director Dan Lusby said most of its tenants rented because they couldn’t afford to buy a home.

He estimated 98 per cent were long-term tenants – one had been with it more than 20 years.

He said renters’ age demographics had changed.

Tauranga Rentals principal officer Dan Lusby. Photo / File

“I’ve been in the industry for 32 years. When I first got into real estate people would leave home and go flatting … they would save for two or three years and buy their first home.

“We have got couples and families and 30- and 40-year-olds and all they have ever known is renting.

“The quarter-acre dream is well and truly gone and now we have got these Coronation Street-like subdivisions.”

Carrie Abbott from iRentProperty. Photo / Andrew Warner

Carrie Abbott, of iRentproperty in Rotorua, said occasionally its tenants bought homes but lending restrictions and high-interest rates meant it was not always easy to get loan approval.

Often it was cheaper to rent as the weekly cost was fixed for at least a year so it made budgeting a bit easier, she said.

It had a $479,000 two-bedroom property that rents for $490 a week but on a low-equity margin interest rate of 8.5 per cent, the mortgage repayments could top $800 a week before rates, maintenance, property management fees and insurance.

The owner could be lumped with repairs or other unexpected costs at any time, but the downside for renters was never having full control over changes to the home or owning the asset.

Cheaper to rent than to own

CoreLogic NZ chief property economist Kelvin Davidson. Photo / Supplied

CoreLogic NZ chief property economist Kelvin Davidson said nationally rents absorb about 21.6 per cent of gross average household income, according to its Housing Affordability December quarter report.

Amongst the main centres, rent’s share was highest in Tauranga at 27.2 per cent. Mortgages in Tauranga were estimated to take 60 per cent - higher than Auckland (55 per cent) and other main centres.

“If you look at the simple cash cost versus the cost of paying a mortgage, rates and insurance, it’s cheaper to rent but that doesn’t necessarily make much consolation because it’s still pretty expensive.”

He said the increase in first-home buyers suggested people were still trying to get out of the rental sector if they could, while others may want or have to rent.

Benefits to homeownership more than financial

Craigs Investment Partners investment director Mark Lister. Photo / Supplied

Craigs Investment Partners investment director Mark Lister acknowledged the challenges for renters and homeowners but hoped those able to buy a home would “aspire” to achieve that.

Homeownership had “lots” of non-financial benefits to families, households and society.

“You don’t want people moving around and kids having to change schools, you don’t want that uncertainty and anxiety about ‘how long are we going to live here’?

“Being able to put down roots, have your own home and build your life around that home in that community in that suburb has a huge benefit across the board.”

Lister said mortgage interest rates were coming down and borrowing costs would be lower. Another bright spot was strong wage growth in recent years.

Many landlords financially stretched

New Zealand Property Investors Federation executive member Tim Horsbrugh said in a statement many rental property owners were financially stretched, as they tried to supplement their mortgage payments to keep their tenants.

The reintroduction of interest deductibility was of crucial significance to foster “a more balanced and sustainable rental market”.

Easing financial strain on owners would create a “more conducive environment for affordable housing and stability for tenants”.

Carmen Hall is a news director for the Bay of Plenty Times and Rotorua Daily Post, covering business and general news. She has been a Voyager Media Awards winner and a journalist for 25 years.