Rent Prices
A reflection on rent changes over 25 years
Rents rise or fall based on only 2 factors
Household incomes - NZ average is around 25%, ie Geometric Mean Rents have been about a quarter of Household Incomes for the last 25 years.
Supply matching demand, rising demand (say immigration) causes Rents to rise, increase Supply (say build too many rental properties) causes Rents to fall
Household Income impact
Household incomes include the salaries or wages of every individual in the household, PLUS any government benefits PLUS income from business profits (eg Side Hustles, Company profits, Dividends, Interest), taxed or not.
Stats Dept have published stats on Household income since 1998, so we have excellent data. MBIE have published Geometric Mean rents since before 1998. Geometric mean rents corrects for house sizes so the data can be comparable.
Simply dividing one by the other we get and interesting chart:
And in case you are wondering about “Minor Regions, here is that data:
To create a 2023 Household Income forecast I have chosen to ignore the Jun 2022 figure - the last time it was reported. I forecast this years HH income by region by adjusting the Income for June 2023 rent/HH income to be similar to last year or matching a long term average. That provides an interesting view when we look at Year on Year Growth in Rents:
Inventory levels
Obviously Wellington rents fell this year and this is a direct result of oversupply. This appears to have come to an end because supply of properties for sale is diminishing quickly
Rental inventory is also slipping, but not as fast as Sales. However supply remains ahead of demand forcing Rents to fall.
Auckland rose after both Growth and Slippage over the last few years of mixed supply levels. Current very low supply has driven Rents higher, but this may not last, there are a lot of apartment blocks unfinished. Note this is Rental Inventory.
Rental Growth by Region
The following charts are to provide you with details of rental changes and are updated monthly for your information. Returning to this post in future will give you the updated charts. I do nothing to MBIE’s Geometric Mean Rent data, I simple publish the data in a form that helps understand it.
Each chart shows the Geometric Mean Rent for the specific region and month, the lines are for each year. You can see YoY growth/contraction by running your eye up the chart for any specific month. All charts have the same scale to be comparable.
Please refer others to this post so they can take advantage of the resource.
Would you be able to do the geometric mean rents as Real / inflation adjusted numbers? Seeing the rent go up year on year is somewhat misleading as a portion of that is the currency becoming worth less and less. For example Auckland rents in late 2022 were at a 5 year low in real terms, presumably after sustained increases building supply.
Or would that not make sense for what you're trying to show?