Let's talk about rental increases, a subject that is frequently thought about amongst landlords and even tenants. While it can be a tricky matter to address, navigating through it becomes sometimes inevitable, especially given the current economic landscape.
According to Stats NZ, as of October 2023, the stock measure, which looks at rental price changes across all renters, was up by 0.2% from September and had risen by 3.2% since October the previous year.
The flow measure, which looks at rental price changes for properties with a new bond lodged over the month, also showed an increase in October, with rents up by 0.7% from September and by 2.3% from October the year before. Trade Me Property’s data tells a similar tale, with rents nationwide increasing by 3% year-on-year in September, pushing the national median weekly rent to $510.
Landlords need to approach rental increases with a fair mindset. This means doing solid market research to make sure any proposed increase is in line with current market conditions. And, of course, any rental increase needs to be communicated clearly and with enough notice to tenants, giving them enough time to adjust their budgets.
How much can a landlord increase rent?
Landlords are in a dilemma. They're trying to make sure their investment properties are giving a good return, especially when interest rates, mortgage repayments and maintenance costs are going up. But on the other hand, tenants want to make sure any increase in their rent is fair and justified.
A fair rental increase should reflect a few things:
- House rental rates by postcode
- The condition of the property
- Added value from refurbishment and new amenities
- Upcoming renewals/changes to a tenant's rental contract
Tenants always have the right to question and seek clarity on any proposed rental increase. They should understand why the increase is happening and make sure it lines up with any agreements in place. Plus, tenants should compare the new rate with similar properties in the area to check its fairness and consistency with the market
How much can a landlord increase rent?
A landlord must provide a written notice at least 60 days in advance prior to implementing a rent increase. For boarding house landlords, a minimum of 28 days' written notice must be provided to their tenant(s).
Even though notice can be delivered ahead of the 12-month period, the rent increase can only be activated 12 months following the date of the last rent increase and 12 months after the commencement date of the tenancy.
The notice must be formally issued in writing, detailing the new rent amount and specifying the date when the increased rent becomes due. It's advisable for the landlord to retain a copy of the notice. If the landlord fails to provide the correct notice, they can:
- Reissue it with the correct details
- Request the tenant to permit them to extend the notice period to ensure it is accurate, or
- Seek permission from the Tenancy Tribunal to extend the notice if the tenant refuses to allow the landlord to extend it.
Finding a balance where landlords can get a fair return on their investment, while tenants aren’t hit with unfair costs, is key. This balance isn’t just about the finances – it’s crucial for keeping a positive and lasting landlord-tenant relationship.
In a nutshell, a reasonable rental increase is one that’s agreeable to both parties, backed up by market conditions, and follows the legal rules. Both landlords and tenants need to approach this topic with understanding and cooperation, making sure the rental increase is fair and serves everyone’s interests. In a market as lively as Wellington’s, keeping things stable and fair in rental adjustments isn’t just good practice; it’s vital for ongoing success in the property management sector.
