If you are a tenant, you may be wondering why your rent is increasing.

The answer is supply and demand – there are more tenants looking for good quality houses than there are suitable houses available to rent.  Hence landlords are able to charge more rent for houses that are desirable to tenants i.e. warm, insulated and well-located.

The reasons for the shortage of rental houses are many-fold.

Supply has decreased because it is harder for investors to borrow to buy or build investment properties due to Reserve Bank policy changes.

Increased government regulations over the minimum standards required in rental properties, such as insulation, will lead to some investors selling their old property rather than spending the money to bring it up to standard.  Whilst it is good that landlords will have to take responsibility for their properties, this will lead to less rental stock available.  These standards also increase the costs of owning rental property, along with ever increasing insurance and rates.

There is also uncertainty about what changes the new government will bring in and this uncertainty is preventing some existing and potential investors buying property, they may prefer to wait and see what happens before investing.

From the development side, we are finding it slower and more expensive to get consents issued by councils.  As development gets harder, some developers drop out of the game, and those who stay may develop less.

With all of these issues affecting supply, we also have an increasing population and, with it, increasing demand for rental properties.  The government’s initiative to make the first year of tertiary study free will lead to more young people starting university, and an increase in students requiring accommodation.  There are also more aged people in rental accommodation than ever before, and this number is increasing each year.

So rents are increasing for many reasons, other than just ‘landlord greed’.  Until there is more good quality rental stock available, rent increases are likely to continue.

John Kenel, Assured