Changing demograph part of tough rental market
house that isn’t run down and that is a lot of money for someone young like me and doesn’t have help or assistance from anyone financially.”
He was living in a three-bedroom home for $550 a week.
“I think that was a score considering how much some people want these days. I definitely plan to stay here.”
‘Fortunate’ to have a great landlord
A Tauranga landlord keeping his rent reasonable has helped his longterm tenants aspire to buy their own home.
Charles, who spoke to NZME on the condition his last name was not published, said he felt “lucky” to have a landlord who appreciated him and his family.
Their rent had increased only $50 over several years and was discounted for a period during Covid.
“We understand each other,” says Charles of his landlord. That included keeping the landlord abreast of maintenance issues and sorting some jobs like cleaning the gutters himself.
It was a welcome change from a previous “nightmare” landlord and Charles had friends who had never been in a rental more than a year as the house was sold or owners moved back in.
“I feel for them because it’s just so stressful.”
Homeownership was on the cards for Charles but he said “skyhigh interest rates” were holding him back and he wanted to wait until the market settled. They had told the landlord of their plans.
Age demographics of renters changing
Tauranga Rentals director Dan Lusby said most of its tenants rented because they couldn’t afford to buy a home.
He estimated 98 per cent were long-term tenants — one had been with it more than 20 years.
He said renters’ age demographics had changed.
“I’ve been in the industry for 32 years. When I first got into real estate people would leave home and go flatting … they would save for two or three years and buy their first home.
“We have got couples and families and 30- and 40-year-olds and all they have ever known is renting.
“The quarter-acre dream is well and truly gone and now we have got these Coronation Street-like subdivisions.”
Carrie Abbott, of irent property in Rotorua, said occasionally its tenants bought homes but lending restrictions and high-interest rates meant it was not always easy to get loan approval.
Often it was cheaper to rent as the weekly cost was fixed for at least a year so it made budgeting a bit easier, she said.
It had a $479,000 two-bedroom property that rents for $490 a week but on a lowequity margin interest rate of 8.5 per cent, the mortgage repayments could top $800 a week before rates, maintenance, property management fees and insurance.
The owner could be lumped with repairs or other unexpected costs at any time, but the downside for renters was never having full control over changes to the home or owning the asset.
Cheaper to rent than to own
Corelogic NZ chief property economist Kelvin Davidson said nationally rents absorb about 21.6 per cent of gross average household income, according to its Housing Affordability December quarter report.
Among the main centres, rent’s share was highest in Tauranga at 27.2 per cent. Mortgages in Tauranga were estimated to take 60 per cent — higher than Auckland (55 per cent) and other main centres.
“If you look at the simple cash cost versus the cost of paying a mortgage, rates and insurance, it’s cheaper to rent but that doesn’t necessarily make much consolation because it’s still pretty expensive.” He said the rise in firsthome buyers suggested people were still trying to get out of the rental sector if they could, while others may want or have to rent.
Benefits of homeownership
Craigs Investment Partners investment director Mark Lister acknowledged the challenges for renters and homeowners but hoped those able to buy a home would “aspire” to achieve that.
Homeownership had “lots” of nonfinancial benefits to families, households and society.
“You don’t want people moving around and kids having to change schools, you don’t want that uncertainty and anxiety about ‘how long are we going to live here?’
“Being able to put down roots, have your own home and build your life around that home in that community in that suburb has a huge benefit across the board.”
Lister said mortgage interest rates were coming down and borrowing costs would be lower. Another bright spot was strong wage growth in recent years.
Many landlords financially stretched
New Zealand Property Investors Federation executive member Tim Horsbrugh said in a statement many rental property owners were financially stretched, as they tried to supplement their mortgage payments to keep their tenants.
The reintroduction of interest deductibility was of crucial significance to foster “a more balanced and sustainable rental market”.
Easing financial strain on owners would create a “more conducive environment for affordable housing and stability for tenants”.
You don’t want people moving around and kids having to change schools, you don’t want that uncertainty and anxiety...
— Mark Lister , Craigs Investment Partners