This trend is growing concurrently with rents increasing after years of relatively flat rental income growth. Christchurch has been the most affordable of New Zealand’s ‘big’ cities to rent in for many years, but that is now no longer the case, according to new figures out from property values data company CoreLogic.

CoreLogic’s latest figures shows rents in the city absorbed 20.9 percent of the average household income in the three months to June this year. That was up from 20 percent a year ago, and up from 19.1 percent five years ago.

CoreLogic chief property economist Kelvin Davidson said the national average had remained largely unchanged over the past few years.

But Christchurch stood out in the figures as it had long been considered the most affordable main centre for renters, and that had now changed, he said.

“Indeed, it is now relatively more expensive to rent in Christchurch than in Wellington, Auckland, and Hamilton,” he said.

In Auckland, Hamilton, and Wellington the rent-to-income ratios were on a slowly improving trend, and were 19.5 percent, 20.6 percent, and 18.0 percent respectively.

Davidson said rents in Christchurch appeared to be rising at a faster rate than elsewhere in the country, and suggested it could be because the volume of available housing stock was under demand strain.

“Demand might be outweighing supply because fewer rental properties were coming on to the market, and more people were moving to the city,” he said.

“The region’s economy has been ticking over, and that gives a degree of confidence to landlords and tenants, because a key driver of rents is income. But rents could have grown faster than income.”

Meanwhile, Trade Me Property’s latest rental price figures show the median weekly rent in Christchurch listings was at a record high of $550 in July, up 10 percent on the same time last year. In contrast, the median weekly rents in Wellington and Hamilton were up 6.6% and 5.8% annually to $650 and $550 in July.

  The data within the Bayleys Canterbury residential property investment team notes that in traditional rental suburbs such as Hornby and Linwood, where rental rates for two-bedrooms units have sat around the $300 per week, we are now seeing a considerable increase to now sit around the $400 per week as the norm. And from our experience, tenants are willing to meet the rates being set by landlords under advisement of their property managers.

Owners who have not kept abreast of this rental income growth are unexpectedly devaluing their traditional investment properties by maintaining lower rental levels – thereby affecting the capitalisation value.

This is because interest rates have crept up over the past 18 months - affecting the rental yield investors have to purchase at, to cover the costs of buying.

TradeMe’s figures show Auckland’s median weekly rents had the biggest annual increase, up 11.7 percent to $670, while the median national rent was up 6.9 percent annually to $620. Canterbury bucked the general supply-demand trend with a seven percent increase in listings on Trade Me, and a 13 percent lift in enquiries.

Independent real estate economist Tony Alexander notes in his latest residential property investment analysis that: “The rental market has turned firmly this year, and while some of this will reflect properties going back to servicing students and tourists, the main reason will be the 2.1 percent New Zealand population surge this past year.”

“The large influx of (migrant) people is placing pressure on the rental market. What will decreasing rental property availability and eventually more firmly rising rents do to house prices? Push them higher,” says Tony Alexander.

“In fact, this effect will be magnified by the extra increase in rents coming from rising costs such as for insurance and rates.”

In July, 17 percent of Tony Alexander’s database said it was easy to find good tenants. By August this figure had leapt to 22 percent. This data has been mirrored by the feedback the Bayleys Canterbury residential property investment team have been tracking in conversations with our network of landlords.

If you would like to know more about the residential property investment market or discuss the content of this article, please get in touch with our specialist team.