Market shift as rent growth stalls and supply builds
New Zealand’s rental market is shifting in favour of tenants, with new data from Cotality’s July Housing Chart Pack showing falling rents in several main centres for the first time in over a decade.
Ministry of Business, Innovation and Employment (MBIE) figures reveal that national median rents fell -0.3% in the three months to May compared to a year earlier – the first annual drop since late 2009.
“After significant increases over 2021-23, rental growth has generally petered out in recent months, or turned negative in some key centres,” said Cotality chief property economist Kelvin Davidson (pictured).
Auckland and Wellington lead national rent declines
Auckland recorded the steepest decline, with the median weekly rent down -2% annually to $650. Wellington City rents also fell -0.8% to $602. Tauranga and Christchurch were among other cities where rental conditions remain subdued.
“There was a sharp rise in rents post-COVID as borders reopened, and net migration spiked,” Davidson said in a media release. “Many new migrants tend to rent, especially given the foreign buyer ban, and that demand placed pressure on key centres such as Auckland.”
“At the same time, rental supply was tighter. Investor activity had dipped due to rising mortgage rates and tax rule changes, which arguably meant fewer rental properties were added to the available pool than otherwise might have been the case.”
Affordability caps limit further rent increases
Davidson said the previous run-up in rents had reached affordability limits for many tenants.
“These dynamics pushed rents up to high levels, both in dollar terms and relative to household incomes, placing strain on tenant affordability,” he said.
“This affordability ceiling is now acting as a natural brake on further rent increases. And while it’s still expensive to be a tenant, the balance of power has shifted slightly. It’s not suddenly easy to rent, but it is nevertheless a friendlier market for tenants than it has been in recent years.”
Softer demand and rising supply reshape rental market
The softening trend is also being driven by falling net migration and increased rental supply.
“Supply has risen as investors are starting to return to the market, and at the same time we’re seeing the completion of many new-build properties,” Davidson said. “Overall, this has contributed to a softening in the rental market, with conditions gradually shifting in favour of tenants.”
Supporting this, a record net 41% of landlords now say they’re struggling to find good tenants – up from a net 25% reporting ease of tenanting just 15 months ago, according to Crockers and Tony Alexander’s July 2025 survey.
That shift is also evident in investor finances, with government figures showing over 50,000 landlords operated at a loss last year, with average profits falling to just $15,680 – a yield of only 1.7%.
What advisers need to know
For mortgage advisers, the shift offers opportunities to support both returning investors and tenants exploring ownership in a more balanced market. Cotality’s July data shows:
- Gross rental yields have lifted to 3.8% – the highest level since mid-2016
- First-home buyers made up 26% of all purchases from April to June
- Smaller investors are returning, targeting more affordable existing dwellings
- New Zealand’s residential property market is now worth $1.65 trillion
- Inflation is within the RBNZ’s 1-3% range, with an OCR cut to 3% likely in August
The Chart of the Month highlights MBIE data showing a clear turn in rent trends: Auckland down -2%, Wellington -0.8%, and Tauranga -0.2%.
With listings high and migration easing, advisers may see more lending demand from returning investors and tenants eyeing a move into ownership.
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