by
February 25, 2025
As we expected in our last update, the number of available rentals in Auckland kept increasing to a record high of 6722 by late November. Currently there are 5868 rentals on Trademe, which is up 59% from 3683 exactly 1 year ago. 2 bedroom units are up 83% from last year, while 1 bedroom’s are up 35%, with 3 bedrooms at 73% and 4’s up 64%.
On the positive side (in the sense that no more bad news is good news) rents appear to be stabilising after a 5-7% fall over the past year, putting us back at the levels of early 2023. We know that some agencies are reporting large growth in rental inflation, but often these are national figures, and incorporate Queenstown where rents are sky-rocketing.
So we are 13% below the peak, but unfortunately we have now reached the normal seasonal low point and so expect that the supply of Auckland rentals will increase over Autumn to a Winter high-point around late June.
We can speculate as to the factors which have created this oversupply of rental properties in Auckland during 2024. We understand that after the previous decade of under-building between 2018-23 the number of dwellings in Auckland increased by 12%, but over the same period the population increased by only 5.5%. The large net migration in 2023 combined with a shrinking of available rentals due to the January 2023 floods hid this pressure until 2024. Our thinking is that the return to normalcy combined with a flood of new build town-houses was behind the large increase in rental supply during 2024. If these are the causes then we can expect a slow correction of the oversupply during 2025, but little scope for rental increases until 2026.
We are finding that fairly priced, well maintained properties are still moving quite quickly. Problems with longer vacancies usually occur when the rentals are overpriced for the current market or not in the best condition. It is very important that the rent reflect the reality of a soft letting market.
Also, innovation and extra efforts may be required. For example, offering an initial one week rent free to stand out from the rest. We have also had some success in renting out larger properties by downsizing the number of rooms for groups. So renting out a 5 bedroom flat as a 4 bedroom with 2 lounges (there are more groups of 4), and adding a clause that if they find another flatmate the rent will increase (back up to the 5 bedroom price, but reducing the rent cost per room).
Another recent example we had was a large 1 bedroom unit (normally filled by a couple) where a prospective single tenant wanted a $40 pw discount to take it. The landlord agreed to this ‘bird-in-the-hand’ provided they moved in immediately. They calculated that a 4 week vacancy period was the equivalent of the $40 pw lost. We added a clause restricting the number of tenants to 1 so if someone else moved in we could renegotiate the rent back up. In a years time we can reassess the rental amount in what may be a more favourable market.
Other options for landlords to consider are to be more flexible with pet owning tenants, bearing in mind that pet-bonds will become active later this year. Also, the return of the 90 day no-explanation notice clause makes taking a chance on a marginal tenant less of a risk then it used to be.
As always, keeping your maintenance up, being reasonable with the rent, and having a great property manager, are all part of surviving the tough times!
Did we mention having a great property manager? :)
