As rents have pushed up in recent years on the back of high migration, New Zealand’s rental market has achieved a record that tenants would rather not set, and global distinction the country would probably prefer not to achieve.
Kelvin Davidson, chief economist at property research firm Corelogic, said average rent as a share of average household income had reached a record high of 22%.
But he said that could conceal the full extent of the impact on tenants.
“The average renter might be paying the average rent, but they might not have the average income, so for them rent will be absorbing a much higher share of their budgets.
“The 22% is not the most important point. Whatever it is, It’s at a record high. Renting is very expensive.”
Meanwhile, an OECD report released in April said that New Zealand was among the most expensive places to rent in the world, on a number of measures.
More than 25% of disposable income was going on rent for renting households, it calculated, ninth in the world.
The country was one of only eight in which median housing costs used up more than 40% of disposable income for the lowest-income tenants.
New Zealand also had a big difference by international standards in the housing cost burden for the lowest-income tenants versus higher-income earners.
“In Colombia, Chile, Finland, Israel, New Zealand, more than half of tenants in the private rental market are overburdened by housing costs. By contrast, in many Central and Eastern European countries, less than 20% of tenants are overburdened by housing costs,” the OECD report said.
Independent economist Shamubeel Eaqub said the impact was not spread evenly through the country. In Gisborne, rent share of income from an average job was near 45%.
He said Stats NZ data showed 27.5 per cent of renters paid more than 40% of their income in rent.
“The benchmark for affordability used to be 30%.”
Davidson said things should improve but only slowly, and not by a lot.
Rent growth was slowing quite quickly, he said. Using the flow measure for rents, which measures new tenancies, rents were up 3.8% in May compared to a year earlier, but down 0.1% compared to April.
“We saw a lot of rental increase because wages were rising, the population was rising very quickly - there were not many rental properties available because landlords were not purchasing as they normally would and supply was tighter. In the last three to six months wage growth has slowed down, migration has slowed pretty sharply and there are some more rental listings coming into the market too so all those things are turning in favour of tenants.”
But he said for rental affordability to improve, there would need to be a strong period of wage growth.
“We are probably not going to see that. Rent growth might slow a bit further but rental affordability doesn’t look like it’s going to improve in the near term… renting is going to remain pretty expensive. It’s not easy whether you’re paying a mortgage or paying rent. This is definitely not a cheap country to rent. It’s not a cheap country to do much actually.”
- RNZ
