Rents are rising faster than wages in most parts of the country, with the gap widening particularly quickly in Auckland, according to interest.co.nz’s inaugural Rental Housing Affordability Report.
This report tracks movements in average rents around the country and compares them with movements in average after tax pay. It will be published quarterly by interest.co.nz.
It has found that in the 12 months from the second quarter of last year to the second quarter of this year, the national average rent (based on bonds received by Tenancy Services at MBIE*) increased from $404 a week to $422, a rise of $18 a week (+4.3%).
Over the same period, national average take home pay, (Full Time Equivalent, based on Statistics NZ’s Quarterly Employment Survey, with tax and ACC deductions at IRD’s standard rates*) rose from $918 in the second quarter of last year to $936 in the second quarter of this year, also an increase of $18 a week (+1.9%).
Rents are increasing at a faster rate than take home pay, with the figures suggesting that in percentage terms, average rents increased at more than twice the pace of average take home pay between the second quarter of last year and the second quarter of this year.
The situation is particularly acute in Auckland, where the average rent increased from $499 a week to $519 a week, up $20 a week (+4%), while average after tax pay rose from just $962 a week to $972 a week over the same period, an increase of just $10 a week (+1%).
So in Auckland, average rents rose at four times the rate of average take home pay, and in dollar terms, the rent rise was double that of average take home pay.
Renters in Wellington are also likely to be feeling the pinch.
The average rent in the Wellington Region increased from $424 a week in the second quarter of last year to $452 week in the second quarter of this year, up $28 a week (+6.6%).
Over the same period, average take home pay in the Wellington Region increased from $994 a week to $1017 a week, up $23 a week (+2.3%).
Auckland’s relatively low growth in average net pay could be an unfortunate side effect of the high rates of net migration into the region.
Net migration is running at a record high and is accounting for nearly two thirds of Auckland’s population growth, adding between 40,000 and 45,000 new residents to the city over the last 12 months.
That means migration is the main driver in the demand for more housing which is running well ahead of the rate at which homes are being built.
So migration will undoubtedly be putting upward pressure on rents.
And it may also be contributing to the region’s lower rate of growth in average pay, with some economists believing that current patterns of migration suppress wage growth, particularly for lower paid jobs.
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