What's up with Wellington's rental market? A property manager's perspective
Compared to 2015, the 2016 year for us was largely a result of changes in Wellington’s rental market. We saw a 52% decrease in the number of properties we listed for lease during our busiest time of year compared to the same time the year before, even though we had a 45% increase in the number of properties we’re managing.
What we’re seeing is longer-term lease commitments from new tenants, and existing tenants are renewing leases, where historically they moved on. Ultimately it’s because it’s getting harder to find and be accepted for rental properties.
The overall driving forces behind this we believe to be:
- Time of year (most leases come up for renewal in Wellington between January and March)
- Preference for houses over apartments following earthquakes
- House prices going up, which has firstly, halted first-home buyers who would usually be leaving the rental market, and secondly, more investors are choosing to sell, so rental stock is low.
We expect this high demand to carry forward through the winter of 2017, which is traditionally a quiet period for rentals listings for us and where we would usually see a significant drop off in demand, but it’s not what we experienced in 2016.
According to TradeMe, most of the demand is larger houses with four to five bedrooms as family-oriented tenants commit to long-term leases, and university students are banding together in greater numbers to share and divide the rental costs to cope with the increases in rent.
The average weekly Wellington rent increase for 2016 was up by 9.5% to $433, and the market is expecting to see an increase again by the end of this year to around $476 a week.
The prices haven’t gone up because landlords are trying to be greedy, this has been necessary for quite some time, so we’re seeing it as a catch-up to the increased costs of investment property ownership. The price increases are largely due to:
- the recent 5.4% increase in Wellington’s rates
- incoming standards around insulation
- the necessity to meth test before and after a new tenancy
- to a lesser degree the new smoke alarm requirements, and
- ongoing compliance costs with health & safety regulation
Of course, when it comes to rental properties it's not always about getting the highest rent. The important word is continuity and pitching the rent just right to ensure your property is always tenanted, and leased by the right tenant so to avoid issues down the road. And if issues do crop up it’s about having the right person with the right experience to deal with it.