Economist says time will come when slower income increases would put a limit on rent rises
Trade Me’s latest report has revealed that rents in Wellington have risen significantly – and renters are struggling to keep up.
Trade Me’s latest rental data for October has revealed that rents in the city have risen at almost four times the rate at which incomes are increasing – with the median weekly asking rent in Wellington, Auckland, and Christchurch increasing between $20 and $40 per week compared to last year.
Wellington’s median rent jumped 7.4% year-on-year to $580 a week while that in the wider Wellington region increased 11.1% to $550. Nationwide, the median rent increased to 4.2% – returning to a record of $500 per week.
Brad Olsen, an economist at Infometrics, believes that time will come when slower income increases would put a limit on rent rises.
“Rental growth continuing to rise above wage growth can't stay that way forever, as at some point renters simply won’t be able to afford higher prices. Already high housing costs are seeing some families on lower incomes make difficult decisions over where to allocate their funds, and the ability to pay for increased rental prices may be running out,” Olsen explained, as reported by Stuff.co.nz.
“Rents do look set to remain rising faster than wages, with wage pressure strong, but not as strong as expected. The tight labour market - with unemployment still at low levels - would generally see wage growth above what we've been seeing recently, which may be due to a lack of job churn. One reason for the high, but not as high as expected, wage rises is that people are staying in their current job and not looking to switch out and bargain for better pay.”
Read more: More households expect rise in house prices
Aaron Clancy, spokesman for Trade Me, pointed out that high property prices have kept people from renting for longer as they prompted year-on-year increase on rent in almost every region.
"The continuing theme of the Wellington property market is the massive demand for rental properties which keeps pushing rents up considerably. The number of rental properties available in Wellington jumped 12 per cent on September but demand continues to outstrip what's available so we keep seeing rents head north,” Clancy said.
"We've seen an increasing number of Wellington tenants looking for rentals outside the city centre in the, traditionally, quieter areas like Lower Hutt and Porirua, opting for a longer commute to work and more affordable rents."
