New Zealand’s rental market is showing signs of a sustained recovery, with affordability improving across nearly every region as rents soften and household incomes rise. According to the Regional Rental Affordability Index, produced by Property Brokers and The Property Knowledge, the share of income required for rent fell to 39% nationally, down 5% over the past year.
Why is rental affordability improving across New Zealand?
The improvement in affordability is largely driven by a combination of easing rental prices and rising earnings. Professor Graham Squires, who led the research, notes that the market is beginning to rebalance, though affordability remains tight in areas where supply constraints persist. Data from the report indicates that while the national average for rent consumes 39% of monthly earnings, regional variations are significant. In Wellington, for instance, rent accounts for 35% of income, while in Canterbury, the figure sits at 38%. The West Coast of the South Island currently offers the country’s most affordable rental market, with a typical weekly rent of $433 consuming 31% of an individual’s income.
Hawkes Bay experienced the strongest improvement in rental affordability over the past year, with a 9% year-on-year increase in affordability as rents dropped by $53 per week.
How does New Zealand compare to the Australian market?
New Zealand and Australia appear to be moving in opposite directions regarding housing costs. According to David Faulkner, general manager of property management at Property Brokers, New Zealand is closing the affordability gap with its neighbor. While New Zealand’s median rent burden sits at 25.5% of disposable income, Australia’s equivalent stands at 23%. However, Australian renters face significant pressure in major hubs; reports from last year indicated that a person earning AU$100,000 annually could spend 54% of their income on rent on the Gold Coast, 48% in Sydney, and 43% in Perth.
Faulkner attributes these diverging trends to policy settings. He argues that the restoration of interest deductibility in New Zealand has coincided with increased rental stock availability. In contrast, he suggests that Australia’s approach—specifically the removal of negative gearing on existing homes—may reduce investor participation and tighten supply. “In New Zealand, we’re seeing broad improvements in affordability, driven by easing rents and rising incomes,” Faulkner said. “Australia, meanwhile, is heading into deeper rental stress.”
What is the outlook for future rental prices?
Industry experts predict a period of relative stability for New Zealand tenants. David Faulkner anticipates a three-to-four-year period of flat rents as the market absorbs new housing stock, particularly townhouses. While some economists, including Simplicity chief economist Shamubeel Eaqub, point out that rental prices are primarily determined by a tenant’s ability to pay rather than just landlord costs, there is evidence of shifting investor behavior. Gareth Kiernan, chief forecaster at Infometrics, observed that Reserve Bank mortgage data showed renewed investor appetite beginning in early 2024, linked to the unwinding of the interest deductibility and the brightline test.
When assessing rental affordability in your area, remember that the “30% rule”—where housing is considered unaffordable if it exceeds 30% of household income—remains the standard benchmark used by many international organizations.
Frequently Asked Questions
What is the most affordable region for renters in New Zealand?
The West Coast of the South Island is currently the most affordable, with typical rents taking up 31% of an individual’s income, according to the Regional Rental Affordability Index.
Why are rents falling in some parts of New Zealand?
The decline in rental burdens is attributed to a combination of rising regional earnings and an increase in rental stock availability, which has helped ease pressure on tenants.
How does the rental burden in New Zealand compare to Australia?
While New Zealand’s median rent burden as a share of disposable income is 25.5%, Australia’s is 23%. However, Australian capital cities have seen high levels of rental stress, with some tenants spending nearly half their income on housing.
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