Rents are falling in the Bay of Plenty as more homes come onto the rental market

An aerial view of Rotorua. Photo / Felix Desmarais/LDR

Rents are falling in Rotorua as more homes come onto the rental market - offering more options for tenants.

Latest Trade Me data shows the median rent in Rotorua was $520 in August - a drop of $25 or 4.5 per cent - from $545 in July and $30 lower than it was in June.

Despite the recent drops the median rent is still $90 higher than it was three years ago.

Trade Me property sales director Gavin Lloyd. Photo / Supplied

McDowell Property Management Limited team leader Aisha Okeremi said the country's property market was experiencing subdued sales activity.

Rather than lowering their price expectations, many owners were turning to the rental market to cover their costs while they move on to their new homes, she said.

"This of course means supply has increased, which creates more competition between similar properties.

"If your rental property is up against three or four other very similar properties, the price needs to be correct to rent it quickly and many are choosing to keep their property on the market at the same time.

"So we are now seeing less of a push for top dollar and rather an interest in good, steady pricing in the hopes of attracting the best tenant in the quickest time frame."

Okeremi said tough lending rules meant some people were choosing to invest their money and continue renting rather than buy their first home.

"Renting is starting to be seen as a lifestyle choice.

"Add to that, the desire to trade in the larger cities for a more relaxed life in the smaller towns, and those already here who are desperate to escape the emergency housing motels, and it's pretty easy to see why demand is still strong around the region."

Rotorua's rental supply had increased but some properties had been listed in early July, she said.

"We have around 16 listings advertised. A good few of them are properties new to the market being either new builds or homes that have previously been owner-occupied and have come to us from the sales market."

Interest from prospective tenants was still strong although they were taking their time to find the right house, she said.

"Where we used to see tenants desperately applying for just about anything they could afford, these days tenants viewing a property are keeping their options open and taking the time to think before committing to a tenancy."

McDowell Property Management Limited property management team leader Aisha Okeremi. Photo / Supplied

"Owners who have neglected to keep their properties up to a good standard over the years will find they become the ones struggling to attract a tenant, especially if they are looking for the higher end of market rent."

Rotorua Property Investors Association president Sally Copeland said there had been a significant shift in the past 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.

"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."

Rotorua Property Investors Association president Sally Copeland. Photo / Supplied

Copeland said a lot of people still needed homes for long-term living arrangements.

"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.

"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."

Rotorua Rentals director Pauline Evans. Photo / Andrew Warner

Rotorua Rentals director Pauline Evans said the city's rental market remained stable with good inquiry across most rental price ranges.

But, she said, there was some resistance for higher-priced properties $680 upwards.

"I would consider many tenants are being squeezed by higher cost of living, with budgets getting stretched."

Evans said, as a result, some investors indicated they would be putting up rents over the next year which might cause an increase in vacancies and force some tenants to seek cheaper rentals.

Others did not want to raise the rents and were keen to keep their current tenant rather than seek new ones, she said.

Evans said there had been a drop in the flow of inquiries from short-term accommodation owners, such as Airbnb because owners were prepared to wait for visitors to return rather than put their properties into the permanent rental pool.

Some tenants wished to negotiate rents, which Evans said would not have happened 12 months ago.

Trade Me sales director Gavin Lloyd said supply in the wider Bay of Plenty region jumped 35 per cent year-on-year in August, more than double the 15 per cent increase in demand for the same period.

"This increase in supply in the Bay of Plenty region is driving these price drops.

"Prospective renters now have more options to choose from which is taking some heat out of the market," Lloyd said.

Rotorua's median weekly rents

August
2019: $430
2020: $450
2021: $490
2022: $520

May $530
June $550
July $545
August $520

Bay of Plenty

August
2019: $480
2020: $525
2021: $560
2022: $600

- Source: Trade Me