New Zealand rental affordability improves as Australia faces growing rental pressure
For the first time in several years, New Zealand's rental market is showing meaningful signs of improvement for tenants.
According to the latest Regional Rental Affordability Index from Property Brokers and The Property Knowledge, rental affordability has improved across almost every region in the country over the past 12 months. Falling rents, rising incomes, and increasing rental stock are helping ease pressure on household budgets, creating a markedly different picture to the one emerging across the Tasman.
The contrast between New Zealand and Australia is becoming increasingly clear.
While New Zealand renters are spending a smaller proportion of their income on housing than they were a year ago, Australian renters are facing the opposite reality, with rents continuing to rise faster than wages across both major cities and regional centres.
Nationally, rents in New Zealand now consume 39% of earnings, down 5% year-on-year. While affordability remains a challenge for many households, the trend is encouraging and suggests the market is beginning to rebalance after several years of sustained pressure.
Regional New Zealand leads the improvement
The strongest gains in affordability have come from regional New Zealand.
Hawke's Bay recorded the largest improvement nationally, with rental affordability improving by 9% year-on-year. The region also experienced the largest decline in weekly rents, which fell by $53 compared to the same period last year.
Wellington, Bay of Plenty, Northland and Canterbury also recorded notable improvements, while Taranaki saw weekly rents ease by $29 and Wellington rents fall by $42.
Nationally, average weekly rents are now $13 lower than they were a year ago.
At the same time, wages have continued to move higher across every region in New Zealand. Otago recorded the strongest annual increase in earnings, with average monthly incomes rising by $844 year-on-year.
Together, these factors are reducing rent-to-income pressures and providing some welcome relief for tenants.
Professor Graham Squires, Director of The Property Knowledge, says the latest figures point to a market that is becoming more balanced.
"New Zealand's rental affordability continues to improve, with easing rents and rising regional earnings reducing rent-to-income pressures across much of the country.
"This marks a clear shift toward a more balanced market, even though affordability remains tight in regions where supply constraints persist."
Housing markets are influenced by a range of economic and demographic factors, but policy settings can have a significant impact on investor behaviour and, ultimately, rental supply.
Property Brokers General Manager of Property Management, David Faulkner, says the diverging paths of New Zealand and Australia highlight the important role government policy can play in shaping rental affordability outcomes.
"The gap between New Zealand and Australia on rental affordability is narrowing, but the direction of travel for each country could not be more different," says Faulkner.
"In New Zealand, we're seeing broad improvements in affordability, driven by easing rents and rising incomes. Australia, meanwhile, is heading into deeper rental stress, with rents rising faster than wages across both capital cities and regional markets."
One of the most significant differences between the two countries is the treatment of property investment.
In New Zealand, the restoration of interest deductibility has coincided with softer rents and increased rental stock availability. While multiple factors influence rental markets, the timing suggests investor confidence and participation have strengthened.
Australia is moving in the opposite direction. Recent Federal Budget changes will restrict negative gearing to new-build investment properties, removing the concession for existing homes.
The policy is intended to encourage new housing supply, but it may also alter investor behaviour in parts of the market.
"While incentives remain in place for new-build investment properties, the removal of negative gearing on existing homes may reduce investor participation in parts of the market, potentially adding further pressure to rental supply," says Faulkner.
"Over time, that has the potential to affect affordability outcomes for tenants."
Affordability remains a long-term challenge
Despite recent improvements, neither New Zealand nor Australia can claim victory when it comes to rental affordability.
The report compares both countries with the wider OECD and finds they continue to sit above the OECD average for rent burden. This reflects broader structural challenges including housing supply constraints, population growth, infrastructure limitations and ongoing demand pressures.
The encouraging news for New Zealand is that current trends are moving in the right direction.
Improving incomes, stabilising rents and increasing rental stock are creating a healthier balance between landlords and tenants than has been seen in recent years. While affordability remains stretched in some regions, particularly where supply remains constrained, the overall direction of the market is becoming more positive.
For renters, landlords and investors alike, the latest data reinforces an important lesson: sustainable rental affordability depends on maintaining a healthy supply of rental housing.
As the experiences of New Zealand and Australia increasingly demonstrate, policy settings that influence investment behaviour can have far-reaching consequences for the availability and affordability of rental homes.
