What are our predictions for the 2024 rental market?

It has been slim pickings for renters over the past 12 months with supply dropping to lows that we saw through the Covid lockdowns of 2021. Not only is there limited choice, Aotearoa has also experienced record high net migration numbers which has increased competition for the already low number of properties.

Surprisingly Aotearoa’s median weekly rent from July to November in 2023 was stable at $620 a week. Seasonality and the underlying supply and demand challenges eventually pushed the median weekly rent in Aotearoa to an all time high of $650 a week in the month of March. This represents an 8.3% increase on the previous year.

Most expensive place to rent in NZ?

• Tāmaki Makaurau remains the most expensive place to rent, with the median weekly rent sitting at $690.
• Hot on its heels is the Bay of Plenty with a median weekly rent of $685.

And the cheapest place to rent?

• At the other end of the scale is Southland with a median weekly rent of $470. Whilst this region is the most affordable in the country it hasn't been immune to the current rental market dynamics with $470 representing a 9% lift on the previous year.

The current coalition government is seen to be more sympathetic to property investors who they believe play a pivotal role in addressing some of the supply challenges the rental market has faced. From 1 April 80% of an investor's interest cost is now tax deductible, a reversal from the previous Labour government’s stance. The reduction in a landlord’s tax bill is seen as removing an existing barrier for investors growing their rental portfolios.

Whilst not as significant as the interest deductibility changes, April's announcement that landlords are now able to capture two weeks additional bond to allow renters to move with their pets, is another move from the government aimed at stimulating the rental market.

The biggest factor that is making it tough for property investors to get back into the market is the affordability of finance. The outlook here is somewhat subdued. Inflation is still above levels that the Reserve Bank is comfortable with. The stubbornness of our inflation numbers makes it unlikely that we will see significant OCR reductions this year. With interest rates more than likely remaining high it would be unlikely to see investors storm back into the market, meaning it might be harder to move the supply challenges the market currently faces.

If supply is harder to solve this year the government's plans for lower net migration will certainly take the heat out of the demand side. In April this year the government introduced changes to the accredited employer worker visa, addressing what it contends are unsustainable net migration numbers.