Now Rent Increasing

One of my predictions for 2022 was “rent will jump to the roof”, let’s see the statistics, why are rents increasing and what would be the prediction for the next couple of months.

Based on MBIE (Ministry of Business, Innovation and Employment) statistics annual average rent increase is about 10%. The rent increase was less than 7% in the last 6 years. This is a national level and depends on the location (main cities, small cities), type of property (standalone, townhouse, apartment) and the number of bedrooms (1 to 4 bedrooms) the rent increase are different. For example in main cities that have universities, apartments rent increased less due to border closure for the international student while standalone 2 to 3 bedrooms in good suburbs which are in demand for renting face the highest increase.

While there are several reasons for rent increases the main reasons are:

• Healthy home standards and compliance increased the cost of ownership for landlords.  
• Government introduce a new tax for landlords in March 2021 (interest rate tax deductibility) which implemented for existing landlords and increase their cost step by step till 2025.
• Inflation is 7% and wages are increasing, why rent shouldn’t follow up them?
• The interest rate jumped from 2.5% last year to 4.5% and this will increase landlord costs.

Based on the above factors it is expected rent increases continue at least for a couple of months, especially opening the border bring more temporary families like international students who will rent apartments, work visas holders who can not buy property till getting residency and finally visitors who will occupy current properties as a short term like Airbnb. In another word, some of the properties are converted to short stays and will reduce rentable properties.

 While somebody may calculate after the current interest rate increase borrowing $1m to buy a house may cost $50000 per year and renting is a cheaper option, needs to consider rent will follow and catch up with inflation, interest rate and wage increase.  If you don’t know how to start planning your property purchase you can contact me for help. There is an option for everyone.