Economists remain divided on what is driving the shift in rental conditions
Rental affordability has improved across nearly every region of New Zealand over the past year, driven by easing rents and rising incomes, according to the latest Regional Rental Affordability Index.
The index, released by property firm Property Brokers and The Property Knowledge, and led by Professor Graham Squires, found that average rents now consume 39% of monthly earnings per job on a national basis, down 5% from a year earlier. Most households, however, pay rent using more than one income, RNZ reported.
Regionally, Auckland recorded a rent-to-income ratio of 39%, Canterbury 38%, and Wellington 35%. The most affordable rental market in the country was the West Coast of the South Island, where a weekly rent of $433 would typically account for only 31% of an individual’s income.
Hawke’s Bay recorded the strongest year-on-year improvement in affordability, with rents falling by $53 a week, representing a 9% gain. Wellington followed, with rents down $42 a week.
Those findings are broadly consistent with official government data. The Ministry of Housing and Urban Development’s December 2025 Change in Housing Affordability Indicators update recorded a 3% national improvement in rental affordability over the year, extending a recovery that began in late 2023.
Wellington’s improvement peaked at 11% in September 2025 before easing to 8% by December. The ministry said that while incomes continued to rise and rents were still falling, the pace of improvement had slowed compared with earlier in the year.
The Regional Rental Affordability Index placed New Zealand’s median rent burden as a share of disposable income at 25.5%, compared with 23% for Australia as a whole.
Economists split on causes
Property Brokers general manager of property management David Faulkner said the two countries were moving in opposite directions. He attributed part of New Zealand’s improvement to the restoration of interest deductibility for landlords, which he said had coincided with softer rents and greater rental stock availability.
“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,” Faulkner said.
The contrast with Australia sharpened further in May when the federal government announced, as part of its 2026-27 Budget, that negative gearing on established residential properties acquired after 12 May 2026 would be restricted from 1 July 2027.
Under the changes, rental losses on affected properties will no longer be deductible against wages or other income but may be offset against rental income or capital gains from residential property.
Faulkner said Australia’s policy settings risked reducing investor participation and tightening rental supply.
“They’re trying to release housing stock for first-home buyers, but all it seems to do is reduce housing supply, and you’re seeing upward pressure in rents in Australia, where ours seems to be going in the right direction,” he said.
Industry figures in Australia have also warned of consequences for renters. Ray White Group managing director Dan White said many of the country’s 2.9 million renters would not be able to transition to home ownership and could be left vulnerable. He noted limiting negative gearing to new builds assumed rental supply was interchangeable when it was not.
Not all economists agreed that interest deductibility was the primary driver of New Zealand’s improving affordability. Simplicity chief economist Shamubeel Eaqub said rent levels were determined more by tenants’ ability to pay than by landlords’ costs. Infometrics chief forecaster Gareth Kiernan noted that Reserve Bank mortgage data suggested renewed investor appetite from early 2024, when the unwinding of interest deductibility and the bright-line test became apparent.
Squires said the market was beginning to rebalance, although conditions remained tight in supply-constrained regions.
“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,” he said.
Faulkner forecast around three to four years of flat rents nationally as housing supply, including a growing number of townhouses, continues to increase.
