Tenant demand was high, and supply was low. So, it was easy to get a tenant.

So, it is more difficult to get a tenant compared to 18 months.

But the 2022 rental market wasn’t normal. It’s not the best point of comparison. 

But why has the market turned?

The 3 reasons the rental market is flat

First, net migration is down to a more normal level. 

We’ve gone from net migration, adding 100,000+ people to our population a year, down to 21,000. So, net migration isn’t pumping up the demand like it used to.

Secondly, lots of Kiwis are leaving New Zealand. 

It’s a pretty bad time to sell a property. So rather than selling their homes, some people rent them out. That adds to the supply. 

And thirdly, there’s the 2021 building boom. A few of those properties sold 3-4 years ago are still being completed. That’s adding to the listings too. 

How much longer is it taking to get a tenant?

So, the market is harder. But what does harder mean? 

I called up Anil Anna from Barfoot and Thompson (they manage 20,000+ rentals). 

He’s their General Manager of Property Management. I wanted to hear how they’re finding the market. 

The average home takes around 31 days to rent. A week longer than last year. Not too bad.

Here’s what I’m seeing at Opes Property Management. 82% of Christchurch properties have a tenant move in within 2 weeks of the last tenant moving out. 

The market is a bit slower in Auckland. 53% of properties have a new tenant move in within 4 weeks of the previous tenant moving out. 

Are rents dropping?

Given all this data … you’d expect rents to fall. 

Instead, they are holding steady. The national median rent is still $600/week. 

So how is it that supply has risen, demand is flat – and yet rents haven’t fallen?

Because rents are what economists call ‘sticky downwards’. 

Once they go up, landlords are often reluctant to drop them – unless they absolutely have to. 

So once they go up … they don’t tend to fall.

Now that’s the average. And the average doesn’t represent everyone’s experience. 

I had one investor drop their rent by $35 last week. Another increased their rent by $20. 

But the average is flat.

And that got me thinking … how long could this flat market last?

When will rents start going up again?

National rents have flat-lined twice before. 

The first was back in 1997. 

That’s when the median rent hit a record $190/week. The median rent stayed there for over four years before taking off again.

Another stall came after the GFC. Rents flattened out at $300/week. They stayed that way for 3 years.

Us landlords have had a bull run for the last 13 years. The median rent doubled from $300 to $600 a week. 

We’re 1.5 years into this flat market. 

So if history repeats, we might have another 1.5 – 2.5 years before rents start rising again. 

There’s always something working for and against you

In property investing … there’s always something working for you and something working against you.

18 months ago, the rental market felt hot, but interest rates were high. And house prices had fallen.

Today, interest rates are down, but the rental market is quieter. Not dead, but quieter. 

Eventually, it will turn around. But by the time the rental market turns around, there’ll be something else for us landlords to focus on.