Why rental prices are dropping and vacancy is increasing

At Lighthouse Financial, we’ve heard directly from clients who are finding it harder to rent out investment properties, often for lower returns than anticipated. That’s prompted us to dig into the data and the reasons why rental prices are dropping and vacancy is increasing across the country.

Across the main centres, rental prices are falling, and vacancies are up. In Wellington, rents are down 8% year-on-year, dropping to $673 per week as of February 2024. That equates to renters saving roughly $3,000 annually—great news for tenants, but not so much for landlords. At the same time, ownership costs in the capital, including rates and insurance, are climbing sharply.

Auckland has seen a similar trend, with weekly rents down 4% year-on-year to $689. Christchurch, meanwhile, remains more stable with minimal changes.

The result? A renter’s market. Whether buying or renting, there’s more supply than demand—putting tenants in a stronger negotiating position.

Several key factors are contributing to falling rents and rising vacancies:

• Increased Supply: Trade Me reports that rental listings have surged 34% year-on-year. At the same time last year there were 8,050 rentals available—now there are over 10,800.

• Lower Rental Demand: More young people are living at home longer to save for a deposit, reducing demand in certain age brackets.

• Unemployment: The unemployment rate has ticked up from 4.8% to 5.1%. While not massive on its own, it signals wider economic challenges and potential income insecurity for tenants.

• Net Migration Trends: Although 158,400 people arrived in New Zealand last year, 127,000 left. Net migration sits around 30,000—down significantly from the 2022 peak of 137,500. Less net migration means fewer new renters entering the market.

All of these elements combined are exposing cracks in the housing and economic landscape that previously remained hidden during periods of high population growth.

Landlords are feeling the pressure and getting creative. From offering a week’s free rent to $500 grocery vouchers, there’s a clear effort to attract and retain tenants. But as competition rises, so too does the need to own a high-quality, well-located investment property. In densely populated areas filled with similar townhouses, it’s become a race to the bottom on price.

For renters? Absolutely. Lower rents mean more money in their pockets—especially welcome in a cost-of-living crisis. For landlords, it’s a tougher road ahead. But after decades of strong returns, some correction may be overdue.

Longer term, rental prices are expected to rebound. Property markets operate in cycles. What we’re seeing now is a down phase, likely to be followed by 5–6 years of recovery and growth.

If you’re renting, now is the time to negotiate:

• Look for cheaper properties in better locations

• Choose homes that allow you to work from home and cut commuting costs

• Seek properties that support your long-term goals, like saving for a first home

If you’re an investor:

• Understand yields may be temporarily down

• Take advantage of a buyer’s market while others sit on the sidelines

• Run your numbers carefully—especially if properties are vacant longer than usual

• Work with a good property manager who can help navigate tougher conditions

As interest rates begin to ease, landlords may find breathing room. Lower costs could mean holding rents steady or trimming them slightly to retain good tenants without compromising cashflow too severely.

At Lighthouse, we help clients navigate the changing property market with smart, long-term investment decisions. If you’re ready to build a financial plan, get in touch to book a free consultation.

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