Rent review strategies: when and how to increase rent fairly

Rent reviews are the awkward family dinner of property investment: everyone knows they’re necessary, but nobody’s comfortable bringing them up.
Yet avoiding the conversation doesn’t make your costs disappear. Rates climb, insurance premiums rise, and maintenance never gets cheaper. Meanwhile, your rental income stays frozen in time.
The question isn’t whether to increase rent — it’s when, by how much, and how to do it without pushing good tenants toward the door.

The 2025 reality: a tenant’s market

The elephant in the room: Auckland’s rental market is experiencing an oversupply, with listings up 15% year-on-year and demand down 7%, according to a May 2025 Residential Rental Update. Properties are sitting on the market longer, with the average Auckland listing now taking 24 days to secure a tenant.

The collapse in net migration and cost-of-living pressures mean tenants are staying put longer, moving in with family, or delaying their departure from the family home.

This doesn’t mean you can’t increase rent — it means you need to be strategic about it.

Know the rules

You can only increase rent once every 12 months, and you must provide at least 60 days’ written notice. The clock starts either from the tenancy’s beginning or the last rent increase, whichever is most recent.

For fixed-term tenancies, you can only raise rent if the agreement explicitly permits it. No clause? No increase until the term ends.

Here’s the crucial bit: there’s no legal cap on rent increases, but you must charge “fair market rent.” Try to gouge, and tenants can challenge you at the Tenancy Tribunal if the rent “exceeds market rent by a substantial amount.”

Your costs don’t dictate rent — the market does.

How much is fair?

Generally, a 3–5% increase is standard – typically around $20 per week. But that’s just a rule of thumb. Your actual number depends on what comparable properties are charging.

Here’s the five-step process for determining fair market rent:

Step 1: Check the data
Use Trade Me’s rental price index to see how rents have moved in your area over the past year. Look at Tenancy Services’ market rent calculator for regional benchmarks. Don’t rely solely on these tools, as they include social housing, which can distort averages.

Step 2: Compare apples to apples
Search Trade Me and realestate.co.nz for properties similar to yours: same suburb, similar size, comparable condition, equivalent amenities. What are they achieving? If your three-bedroom in Mount Eden is renting for $650 while comparable properties list at $700, you’ve got room to move.

Step 3: Calculate your yield
Work out your gross rental yield and compare it to other investors in your area. If you’re achieving 3.5% and the area average is 4.5%, your property is likely under-rented.

Step 4: Consider your property’s position
Is your place immaculately maintained? Recently renovated? Does it have features others don’t, such as a heat pump, insulation exceeding minimum standards, off-street parking, or outdoor space? Premium features justify premium rent.

Step 5: Factor in tenant mobility
Who’s living there, and how easy is it for them to move? A family of four with kids at the local school, pets, and a garage full of belongings? They’re anchored. A single professional in a furnished apartment? They can pack and leave in a weekend.

Your pricing power varies accordingly.

Timing is everything

Annual reviews make sense. Small annual increases are better than large increases every few years. Tenants can absorb $20 per week far more easily than $80 after four years of no change.

But timing within that annual cycle matters too:

Good times to increase rent:
• After completing significant improvements (new heat pump, fresh paint, renovated bathroom)
• When the lease naturally comes up for renewal
• During spring, when rental demand typically peaks
• After the tenant has been in the property for at least 18–24 months and proven to be excellent

Bad times to increase rent:
• In the middle of winter, when moving is miserable
• During school term, when families are settled
• Immediately after maintenance issues or disputes
• When comparable properties around you are sitting vacant

And never increase rent as retaliation for a legitimate complaint or maintenance request. That’s not just poor strategy – it’s asking for trouble.

The communication framework

Clear, professional communication is vital. Even though legally you just need to provide written notice, the smart approach involves more nuance.

• Three to four months before the increase: Have an informal conversation. “Hi Sarah, just wanted to give you a heads-up that we’ll be conducting our annual rent review in the next few months. I’ll be looking at comparable properties and will let you know what we’re thinking well in advance.” This eliminates surprise and gives tenants time to adjust their thinking and budget.

• 60+ days before the increase: Send formal written notice. Keep it professional but human:

“We hope you’ve been enjoying living at [address]. As part of our annual review, we’ve assessed current market rates for similar properties in [suburb]. Based on this research, the weekly rent will increase from $650 to $670, effective [date]. This reflects current market conditions and the ongoing costs of maintaining the property to a high standard. All other terms remain unchanged. If you have questions, please get in touch.”

Simple. Clear. Justified. No apologising, but no arrogance either.

What not to say:
Don’t blame external factors exclusively (“rates went up,” “insurance doubled,” “government regulations cost me money”). While true, these are your business costs. Tenants care about market rate, not your expense breakdown.
Don’t threaten (“If you don’t like it, you can leave”). Even if you’re thinking it, saying it damages the relationship.
Don’t over-explain: A brief rationale is fine. A three-page justification looks defensive.

When good tenants are worth more than extra rent

If you have tenants who pay on time, maintain the property beautifully, don’t create problems, and communicate well, they’re not just tenants – they’re partners in protecting your asset.

In the current market, tenant retention is key. The cost of tenant turnover – vacancy periods, advertising, property preparation, and tenant screening – easily exceeds several months of modest rent increases.

Consider this: a two-week vacancy costs you $1,300 in lost rent on a $650/week property. Add advertising ($150), professional cleaning ($300), minor repairs and touch-ups ($500), and you’re at $2,250. That’s more than a year’s worth of a $40/week rent increase.

If you have an excellent tenant and the market is soft, sometimes the strategic play is a smaller increase or even no increase at all. Keeping them another year might be worth more than squeezing an extra $30 per week and risking vacancy.

Exceptions to the 12-month rule

You and your tenant can agree to increase rent outside the usual 12-month period in specific circumstances:
• You’ve made substantial improvements that increase the property’s value and benefit the tenant (renovated kitchen, added heat pump)
• You’ve improved facilities or services (added off-street parking, installed fibre broadband)
• You’ve changed the tenancy agreement to benefit the tenant (now allowing pets, switching to a periodic tenancy)

These must be genuine improvements, agreed to in writing, and the increase must still reflect fair market value.

What to do when tenants push back

Most tenants, presented with a reasonable increase backed by market evidence, will accept it. Some will negotiate. A few will threaten to leave.

If they question the increase:
• Provide evidence of comparable properties and their rents.
• Offer to show them Trade Me listings and Tenancy Services data.
• Be open to discussion, but don’t budge if your research is solid.

If they threaten to leave:
• Don’t panic. Call their bluff politely: “I understand. You’ll need to provide 28 days’ notice in writing if you decide to move.”
• Consider whether a small compromise makes sense given vacancy costs.
• Remember that some tenants use this as a negotiation tactic.

If they actually give notice:
• Thank them for their tenancy.
• Start advertising immediately.
• Use the opportunity to potentially achieve even higher rent with a new tenant.

The bigger picture

The era of tenants accepting anything is over. The current market requires professionalism, market awareness, and strategic thinking.

Your rental property is a business asset. Treat it like one. That means regular reviews, market-aligned pricing, and professional communication. But it also means recognising when holding steady is the smartest move.

The best rent review strategy? Know your market, communicate clearly, maintain your property impeccably, and treat excellent tenants like the valuable partners they are.

Need help determining fair market rent for your property? Call 0800 GOODWINS for a professional rental appraisal and market analysis.