The State of Wellington Rental Property Management 2024-2025

The Wellington region is home to over 45,000 rental properties, housing approximately 11% of the New Zealand population and ranking third largest out of the 16 regions in the country.

With a wide-ranging demographic of renters across a varied area, housing everyone from families wanting to be in certain school zones, students wanting to be near Massey and Victoria Univeristy campuses, workers wanting to be within easy reach of the CBD, and those that want a bit more space on the outskirts of the region. Housing types are varied but older homes are relatively prominent, aside from newer developments in the Hutt Valley and apartment buildings in Wellington Central.

It’s no surprise then that owning a rental property in the region is popular for owners and investors alike. However, the seasonal demand cycle, the geographical nature of the region, and the older style homes pose potential challenges for owners.

With a large selection of Property Managers operating in the region and over 50% of rental properties self-managed by owners directly, tenants can often have varying experiences when renting a property in the area.

In this article, we take a deep dive into Wellington’s rental market and share information & insights for current investors with properties in the area or for those looking to invest in this popular location.

Wellington Rental Property Market Overview

Typically, Wellington experiences seasonal demand for rental properties. There is higher demand for rental properties during the ‘peak’ season from around November to February. Outside of this, the demand for properties tends to be lower, so vacancy rates can increase and rent levels slightly lower.

This seasonal demand is driven by a historic trend of properties being let within the ‘peak’ period for 12 month tenancies, ensuring that when the tenancy ends, if the tenants choose to move on, the property is able to be offered within the peak season. It is also impacted by the student segment of the market who generally look to secure their housing for the coming study year within this timescale.

In the last few years however, there has been a shift in this trend, as revised legislation passed by the previous Labour Government limited property owners’ ability to end a tenancy at the expiry of a fixed term and gave tenants the ability to remain at the property on a periodic tenancy if they did not wish to sign onto a new fixed term agreement. This has meant that a portion of tenants have taken this up and have been able to give the required 28-day notice to vacate the property at any point. It is a less favourable situation for property owners, as outside of the peak season can be a challenging time to secure tenants.

According to the latest market rent data, rents in the Wellington region have only increased by 2.8% over the last 12 months, and this is following another low level of increase in the prior 12 months of 1.1%. In saying this, the average weekly rent for the region remains one of the highest in the country and was sitting at $579 compared to the NZ average of $560 at the end of March 2024. In comparison, New Zealand’s largest City, Auckland had an average rent of $624 per week.

In more recent months, the current government job cuts appear to have had a significant impact on demand for Wellington rentals. Combined with a lower student intake at Victoria University, we are seeing properties take longer to place tenants.

The supply of rental properties in the region has also lifted, meaning tenants have a lot more choice than normal. A factor in this is the weaker sales market as we see more clients turning to renting their property when they have been unable to sell.

As a result of these local supply and demand pressures, pricing and marketing have become key to ensuring a faster turnaround in securing good quality tenants.

Challenges in Wellington Property Management

When it comes to owning and managing an investment property in Wellington, there are some challenges to overcome.

As previously mentioned, the seasonal demand can cause extended vacancy rates and potentially lower rent levels should a property need to be rented in the months outside the peak season. In saying that, we still find good interest in well-priced properties in good locations. For example, a recent listing in Tawa was secured by new tenants within just over two weeks, whilst at the same time another listing in Karori was on the market for almost seven weeks before suitable tenants were secured.

On the flip side, during the peak season, it’s not unusual to have groups of 20 or more at each viewing and vacancies of over two weeks are very unusual. In January and February of 2024, the Just Property team let 44 properties across a portfolio of around 410 managed properties.

Our experience is that with the high rental prices being sought for properties, tenants are, rightly so, expecting a better quality product. We are often asked by prospective tenants about the Healthy Homes compliance levels for properties, showing that there is an appetite from tenants to secure warm, dry and efficient homes to rent.

Expectations around repairs are also increasing, with timely attention to repairs or maintenance issues becoming more and more important. Having access to a reliable team of tradespeople is key to ensuring these issues are dealt with in a reasonable time frame.

Property owners have to balance this with the higher costs of holding rental properties. Over the past few years, the cost of owning a rental property has increased significantly in many cases with hikes in interest rates, insurance costs, rates costs and even the cost of maintaining a property. Whilst some more recent government policy adjustments such as the reversal of the interest deductibility rules and brightline test timescale reductions might help, there are still significant cost pressures on rental property owners and it can often be the case that property owners find their investments are cash flow neutral or even negative.

Opportunities for Property Managers and Property Owners

There is an opportunity in the challenges noted however, with a shift in thinking; utilising new technology and ways of working, property owners and property managers can work to maximise the returns on their properties.

In more recent times, we are seeing more tradies in need of work, and approaching property managers offering their services. This additional competition in the property maintenance space can help tackle rising maintenance costs.

Our experience is that having a trusted set of tradespeople is key as part of efficiently managing properties for clients, so having a larger pool of tradespeople to look to work with can ensure we are not only getting the best prices, but also the best service for clients and tenants alike.

Its also key to ensure a regular review of any maintenance or improvements that can be made to existing properties is undertaken to identify where additional return could be achieved. Having a pro-active maintenance plan in place or identifying opportunities to add value to rental properties can help increase the return on a property and attract quality tenants faster when needed.

Technology in the property management space has changed drastically over recent years with digital products available to assist with the huge range of property management tasks such as maintenance, tenancy applications, viewing arrangements and inspections. This will continue to pay a key role in the future of streamlining and reducing the background administrative aspects of the day to day work of a property manager, enabling them to focus on building and maintaining great relationships with property owners, tenants and tradies.

As we look into the future there is a lot more to come in terms of technological advancement in the property management space. Automation and AI will be integrated within the systems currently used by property owners and managers and will continue to reduce the daily administrative workload. We are already seeing things like automated arrears notifications to tenants, as well as AI assistance with property advertising and promotion.

Social media is also playing a larger role, with renters turning to social media groups to help them find suitable rentals or flatmates, alongside asking for assistance with current rentals, or advice and guidance from others about property or landlord-related concerns. There are several Facebook groups for instance which offer flatmate finding or specialise in promoting pet-friendly rentals in the local market.

The Regulatory Environment

Despite the number of rental properties managed by Property Managers, there is currently no requirement to be qualified and no formal regulation of the industry itself. This means anyone can start up a Property Management company with little or no experience.

There are a few voluntary industry bodies that Property Managers can choose to subscribe to such as the Real Estate Institute of NZ and the Residential Property Managers Association of NZ. These schemes support the education and promotion of their Property Management members and have strict codes of conduct that their members must adhere to.

For an extra layer of peace of mind, investment property owners may be wise to choose a property manager who is a member of one of these schemes.

Tenancy services and the Ministry of Business and Innovation (MBIE) have general oversight on residential tenancies in NZ, with the tenancy tribunal able to make decisions and rulings on cases brought to them by property managers, property owners, tenants or MBIE themselves.

Over the past few years, there have been several changes to the legislation around rental properties which have affected landlords and property managers. These included the Healthy Homes requirements, smoke alarm requirements, updates to the Privacy Act and the RTA Amendment Bill 2020. More recently the new government has announced the RTA Amendment Bill 2024 which looks to reverse some of the changes in the 2020 bill and includes rules to make it easier for renters to keep pets in their rental properties.

The property management industry has navigated its clients through these updates and changes and has played a key role in educating landlords and tenants about the changes and requirements.

Some of the changes were attributed to the reduced supply of rental properties over the past few years, as some investment property owners decided to sell their rental properties instead of keeping up with the compliance requirements. There has however also been the impact of the less appealing prospect of owning a rental property in more recent times with the increase in the cost of purchasing and maintaining a rental property with the current environment of higher interest costs, more expensive rates & insurance.

Expert Insights and Predictions

So what is in store for the local Property Management market over the next 1-2 years?

For one, we know that the withdrawal of the requirement for Property Managers to be regulated will mean that the number of Property Managers operating in the local industry will likely remain similar. There are a large number of Property Management companies ranging from small, family run or sole trader outfits, through to the larger more corporate companies.

It is clear however that the industry is becoming more about relationship management over just ticking the boxes. According to a 2021 MBIE Landlord survey, most clients use a property manager as they do not have the knowledge (66% of those surveyed) or time to manage their property themselves (45% of those surveyed), so it is key to have a trusted advisor on your side, looking out for you and your investment.

The same goes for tenants, as they rely on having a good, proactive and responsive property manager to ensure that when things go wrong, or they need help, they are able to get this in a timely manner and receive reliable and accurate advice.

Property Managers who can focus more on building and maintaining relationships with their clients and tenants will likely be able to retain existing clients and attract new ones too.

Due to the challenging local sales market, the rise of the ‘accidental landlord’ has been a recent occurrence over the past year and will likely continue for the next 12 months or so. These are clients whose rental property was not intentionally purchased as a rental and are usually those who have been unable to sell their property to make their next home move or are waiting out the market and therefore turn to renting their property as an interim measure.

As we look further to the future, with lower interest rates on the horizon and the previously mentioned adjustments to the Interest deductibility and bright-line tests, we should see a return of property investors looking to purchase again. In saying this, in the June 2024 Tony Alexander Investor Insights survey only 19% of the investors surveyed advised they would potentially look to purchase another property in the next 12 months. This was up from 17% in the previous report, however.

So the outlook for renters could also be better as with a larger supply of rental properties there will be more choice and potentially lower rent levels if the demand does not also significantly increase in the same period. Migration, public sector-associated job roles and the return of international students will have the biggest impacts on the region’s demand for rentals, with two of those three sectors showing growth.

How Just Property is Helping Property Owners and Investors

Engaging with a property manager is a big decision for property owners and investors. Handing over what is likely the biggest investment you own is not a decision to be taken lightly and knowing you have a team who have your back is key.

Just Property Management has been operating in the local market for five years now and works closely with the well-established Just Paterson Real Estate team which has been in the business for over 30 years now. We have a great understanding of the local market in the region and the trends so can give you sound advice on all fronts.

As a mid-sized property management company, we operate in all areas of the Wellington region, so have good insights across Wellington Central, Lower Hutt, Upper Hutt, Porirua and the Kapiti Coast. We have an experienced team, with a focus on quality, not quantity. Our team have overseen thousands of tenancies and works closely with each other ensuring a collaborative approach to our work and sharing of knowledge.

We offer a casual ‘Tenant finder’ service for those who just need assistance securing great tenants. Our full Professional Management service encompasses the entirety of the day-to-day oversight of the property and tenancy from placing new tenants, managing maintenance, organising regular inspections and advising clients and tenants appropriately when queries arise.

We pride ourselves on working with a local team of tradespeople who ensure prompt and efficient management of any maintenance or repair work. We pay our contractors weekly so they don’t have to wait to be paid, unlike some other agencies. We can also identify and organise proactive recurring maintenance jobs, assist with overseeing larger projects and can even provide our clients with a long-term maintenance schedule if required.

As a member of the Real Estate Institute of New Zealand, Just Property have chosen to be regulated and adhere to REINZ’s strict code of conduct which includes operating an independently audited trust account for client funds, training and development for our team as well as access to their advisory services when we come across anything we haven’t before. Our team are also completing the NZ Certificate in Residential Property Management, ensuring we have a professionally trained team who understand the rules and obligations of the role they undertake.

So when it comes to choosing a property manager, if experience, professionalism, skill and care are important to you, we would be delighted to offer our guidance and support, whether you need a rental appraisal for a property you are considering purchasing or just need some guidance about a situation you are experiencing with your rental property. Our team are here to help.

Conclusion

The Wellington rental market holds great opportunities for investors, but also various challenges as highlighted in this article; changing rules and regulations, seasonal demand, access to reliable tradespeople and increased expectations from tenants are all aspects of the market that property owners and property managers need to navigate.

Owning or renting an investment property is a journey, and one that Just Property Management is delighted to be part of for our clients and tenants. Our aim is to be Wellington’s most approachable Property Management company and to be a trusted advisor to our clients.

So, if you need to know the latest in the region’s rental trends, require a free rental appraisal for an existing/potential rental property or just want us to take over that headache of a rental property that is keeping you up at night, get in touch with the team and we can guide you through the process and help take the hassle away from owning a rental property in the Wellington region!