The average rent on new tenancies increased 7.6% in the June year

Property

Rents in Wellington are rising so strongly they are closing in on Auckland, with average Auckland rent now just 5% higher than Wellington average

5th Jul 19, 7:31am by Greg Ninness

There has been strong growth in residential rents in the last 12 months, with rents in Wellington close to catching up with those in Auckland.

Bond data from the Ministry of Business, Innovation and Employment’s Tenancy Services division analysed by interest.co.nz shows that the average rent from new bonds received from throughout New Zealand in the second quarter of this year was $450 a week, up 7.6% compared to the second quarter of last year.

That means that on average, renters are likely to be paying around $32 more a week in rent than they were 12 months ago.

And the rate of increase is also on the rise.

Between the second quarter of 2017 and the second quarter of 2018, the average rent increased by just $19 a week (4.9%).

However there are substantial regional differences, with rents generally rising more slowly in Auckland and Christchurch than in most other parts of the country.

This country’s most expensive rental district is Queenstown-Lakes, where the average rent in the second quarter of this year was $638 a week, up 8.8% compared to the second quarter of last year.

That was followed by the Auckland region, where the average rent increased by $16 a week (3.0%) between the second quarter of last year and the second quarter of this year, from $515 a week to $531 a week.

However the 3% growth in rent was down slightly from the 3.5% increase over the previous 12 months.

Significant differences within Auckland

There are also significant differences within the Auckland market, with the biggest increases occurring in the region’s western and southern districts with annual increases of 7.8% in Franklin, 5.4% in Waitakere, and 5.0% in Papakura, but just 0.8% in Rodney which was the lowest percentage increase in the country, 1.9% in Auckland’s central suburbs and 2.2% in Manukau.

Of the main centres, Wellington posted the biggest increase, with the average rent in the Wellington Region hitting $504 a week in the second quarter of this year, up 11.1% compared to a year earlier.

The rate of increase was even higher in Lower Hutt at 13.9% and Wellington City at 12.1%.

The higher rate of rent growth in Wellington compared to Auckland means the difference in rents between the two regions is rapidly narrowing.

In the second quarter of 2017, the average rent in the Auckland region was $65 a week (15%) higher than in the Wellington region. But in the second quarter of this year that gap had reduced to $27 a week, or 5.4%.

Modest rental growth in Christchurch

Rental growth in Christchurch has been at very modest levels for the last two years.

In the second quarter of this year the average rent in Christchurch was up just 1.2% compared to the second quarter of last year, which was half the rate of increase over the previous 12 months.

Christchurch’s average rent of $381 a week was lower than the average rent in any of the North Island’s rental districts except New Plymouth, Palmerston North and Whanganui.

Rental growth between the second quarter of last year and the second quarter of this year was between 5% and 10% in most provincial districts.

The table below shows the average rent in all districts in the second quarter of this year, and the annual percentage change for the last two years.

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	Average rent $/week	% Change	% Change
	Q2 2019	Q2 17 - Q2 18	Q2 18 - Q2 19
Whangarei	412	7.6%	7.6%
Rodney	526	3.8%	0.8%
Waitakere	527	2.6%	5.4%
North Shore	589	2.6%	4.0%
Auckland Central	530	3.1%	1.9%
Manukau	528	4.5%	2.2%
Papakura	517	2.6%	5.0%
Franklin	493	3.8%	7.8%
Auckland Region	531	3.5%	3.0%

Hamilton	420	2.4%	8.7%
Tauranga	494	4.1%	6.8%
Rotorua	385	13.4%	9.8%
Napier	439	8.8%	12.1%
Hastings	382	5.4%	9.3%
New Plymouth	367	3.4%	4.5%
Palmerston North	350	6.3%	7.2%
Wanganui	311	11.1%	15.6%

Kapiti	429	8.5%	4.9%
Porirua	465	6.6%	9.0%
Upper Hutt	422	19.0%	6.9%
Lower Hutt	452	8.4%	13.9%
Wellington City	537	2.4%	12.1%
Wellington Region	504	4.6%	11.1%

Ashburton	344	3.0%	5.3%
Banks Peninsula	350	-4.2%	3.9%
Christchurch	381	2.4%	1.2%
Mackenzie	353	-9.0%	20.5%
Rangitikei	265	7.0%	12.6%
Selwyn	457	-4.6%	6.3%
Timaru	333	5.2%	5.8%
Waimakariri	407	-1.3%	5.4%
Canterbury Region	380	1.7%	2.3%

Nelson	406	6.1%	6.0%
Queenstown-Lakes	638	3.4%	8.8%
Dunedin	357	9.5%	7.9%
Invercargill	289	5.7%	11.5%

New Zealand	450	4.9%	7.6%

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124 Comments

by Pragmatist | 5th Jul 19, 7:45am 1562269523

Rental growth slowing in Auckland. And rents increasing more in the south/outer areas. I wonder how much of that is because of the new builds.. seems entirely reasonable to be paying more for a better house. We need a rental HPI,. Gross median rent doesn't indicate whether the quality of the rentals is improving. (With the insulation requirements the quality of rentals in South Auckland has increased, just likely not far enough)

by Nzdan | 5th Jul 19, 7:52am 1562269951

The quality of the rentals should be improving with the Healthy Homes Standards.

by CJ099 | 5th Jul 19, 9:12pm 1562317950

Sadly most Landlords don't follow that logic and will just shove up the rent regardless of the rentals condition. But here's some evidence that shoving up the rent too much can cause tenants to pull back, especially when property values are falling. Why rent when you can buy a home instead.
Look at what is happening in Auckland (figures above) and see what is happening Australia now. Article: Rent prices have fallen by as much as 41 per cent in these Aussie suburbs! https://au.finance.yahoo.com/news/australian-property-suburb-rent-price…

by Nzdan | 5th Jul 19, 9:28pm 1562318916

It couldn't happen here!! House price falls are one thing but if you carry on paying your mortgage (Landlords too) then there shouldn't be any problems. Losing tenants though, that's a completely different kettle.

by CJ099 | 5th Jul 19, 9:40pm 1562319607

"Losing tenants though, that's a completely different kettle" Yes that's a very big kettle and when you tap out the wage earning market which is evident in the Auckland stats, expect that kettle to boil dry. Remember immigrants are a very movable work force.

by Narrabeen Boy | 5th Jul 19, 9:53am 1562277202

We bought a block of seven units in Hamilton,Three Two's,Three ones and a studio.Combined rent when we bought it in late 2013 was $1215.Over the space of five and a half years the combined rents have gone up to $1700.Our property manager is always letting us know that rents are going up and that they are now under rented again.She wants to put them up six monthly but we are happy just putting them up yearly in late Feb early March when this is around the time people are looking at re locating.

by Houseworks | 5th Jul 19, 10:15am 1562278513

Tenants between rock and hard place, cant move somewhere cheaper as there arent any. We also have let our resi rents slip, we usually wait for someone to leave and then go to market price but no one shifting. Time to catch up.

by NorthernLights | 5th Jul 19, 2:23pm 1562293432

Gee only $1700 a week for 7 units ?

by Houseworks | 5th Jul 19, 3:08pm 1562296127

No need for that, everything is relative.

by Narrabeen Boy | 5th Jul 19, 3:14pm 1562296459

Yeah very under rented.If it was at market rent we could be getting another $200 a week extra.Going to put them up to $1880 in march next year.Current yield is just over ten percent so they are paying us money which we pay down debt with.Morgage will be paid off in five years.Bought them for $865k

by Yvil | 5th Jul 19, 3:43pm 1562298224

Well done NB

by Narrabeen Boy | 5th Jul 19, 4:18pm 1562300294

Cheers Yvil.Everyone thought we were mad at the time.Now it seems it was a no brainer!!!!!

by Houseworks | 5th Jul 19, 4:33pm 1562301223

According to the haters here you dont need a brain to be a Landlord haha. It's actually the smart people who made the right moves at the right time. Well done from me too

by Houseworks | 5th Jul 19, 4:30pm 1562301037

1880 per week is around 260 pw each. There is an affordable rental that rents easily and was built decades ago. Why dont council set some new rules that allow for these again.

by Narrabeen Boy | 5th Jul 19, 5:10pm 1562303407

Yeah exactly!!!I'm guessing they are building (apartments)that costs loads more to build than just plain old insulated,double glazed flats.I reacon we need to build simpler cheaper stock.

by sharetrader | 5th Jul 19, 7:49am 1562269764

what does the government do?
increase the accom supp? no rents will go up
increase hardship grants? no rents will go up
build more social housing, yes can hold rent increases with more supply and move money towards capital rather then into banks pockets
bring in rent controls? interesting like CG tax does not work efficiently

by dictator | 5th Jul 19, 7:57am 1562270278

RBNZ decreases OCR and interest rates are at record lows. Rents go up.

by Joe Wilkes | 5th Jul 19, 7:51am 1562269884

Great news love we made an extra $1250 last year in rent and only lost $12,000 off our capital. (Waitakere)

by Zachary Smith | 5th Jul 19, 8:04am 1562270656

I don't think landlords think about capital all that much, it ebbs and flows. The fairly constant increase in rents is far more important over the long term as it directly relates to the business of landlording and to the fundamental value of a rental property.

by Nzdan | 5th Jul 19, 8:16am 1562271400

Just like a Taxi driver probably isn't too concerned about the depreciation on their vehicle.

by tothepoint - d… | 5th Jul 19, 11:27am 1562282839

You're absolutely correct, Zachary.

Rental yields are more important than capital appreciation for many property investors/landlords. For quite a few of them - especially retirees - yields are important for supplementing the household income.

In any case, rental yield is fundamental to underpinning capital gain. That yields are currently increasing through rising rents and flat prices will be seen as a positive sign by many investors.

Those here who dismiss or ignore rental yield misunderstand property investment - and there is one person here in particular who’s guilty of that......

TTP

by Retired-Poppy | 5th Jul 19, 6:39pm 1562308768

Like owner occupiers, Landlords are being hit by rising insurance, maintenance and rates and are struggling to pass it on. Ring fencing is about to cost specuvestors $190 million a year! 40% of Landlords are recording losses after expenses here; https://www.interest.co.nz/property/97266/ird-cant-say-certain-how-ring-...

Insurance is a serious issue and the RBNZ has warned house prices could fall because of it here; https://www.interest.co.nz/insurance/99916/reserve-bank-warns-house-pri…

Despite all this expensive reality, REA-Tothepoint has guaranteed there will be capital gains on investment properties going forward so even though its unbanked, he says it can safely be calculated as part of the NET yield.

by tothepoint | 3rd Jul 19, 5:17pm "When longer-term capital appreciation is added to rental yield, your argument for bank term deposits becomes very weak"

As the economy falters going forward, unemployment will rise, house prices will further weaken with rents following close behind as people cluster into bigger groups, kids move back home etc. It's a bubble all round and it's not going to last. Housing from an investment perspective is losing its allure. This has been borne out in the lending figures moving in favour of naive FHB's, away from investors. Now that capital gains have evaporated, nett yield after all costs is paltry (most likely negative) after taking tenant risk (such as vacancy and damage) into account. Those who are not reporting loss are likely sitting on sizable equity that, if the house/s were sold, it can be banked and deployed into TD's or managed funds with less risk exposure so to escape the declining house market. Right now, it's a highly attractive alternative given the rising risks and that's why many specuvestors are now wanting out.

by Houseworks | 5th Jul 19, 6:47pm 1562309240

Is that rant directed at your naive sycophants, because others are not fooled by your tactics. Before you start, we are not highly leveraged or under pressure specuvestors or having any FONGO. Invent another label retired poppy.

by Retired-Poppy | 5th Jul 19, 7:16pm 1562310984

Hmmmm, the label "paranoid" now comes to mind. Yeah, that fits.

by Houseworks | 5th Jul 19, 7:22pm 1562311376

It's a word that's close to your mind. Have a good night

by CJ099 | 5th Jul 19, 9:16pm 1562318201

Sleep tight try not to let the bed bugs bite: Rent prices have fallen by as much as 41 per cent in these Aussie suburbs
https://au.finance.yahoo.com/news/australian-property-suburb-rent-price…

by Houseworks | 6th Jul 19, 6:35am 1562351729

Thanks CJ. Early to bed and early to rise, makes a man healthy, wealthy and wise! I am living proof!!

by tothepoint - d… | 6th Jul 19, 2:01am 1562335266

Hi Retired-Poppy,

Where have I said that capital gains on investment properties going forward are "guaranteed"?

Or is this yet another of your lies?

Often you mis-quote people. Where's your conscience?

TTP

by Retired-Poppy | 6th Jul 19, 7:51am 1562356307

Yup, typical REA-Tothepoint implies everything and takes zero responsibility (spineless) when held to account. In a desperate effort to enhance his agenda, he tries to shift responsibility for his frequent gaffes onto more reputable commentators. There is no way that anyone with an element of financial acumen can take your unverified ramblings to be anything other than garbage buddy:)

by tothepoint - d… | 6th Jul 19, 12:15pm 1562372142

Hi Retired-Poppy,

Noted that you can't provide evidence that I "guaranteed" there will be capital gains on investment properties going forward.

Again, you are shown to be a liar.

TTP

by Retired-Poppy | 6th Jul 19, 1:21pm 1562376110

Lol, me a liar? You wish! You implied it as a comparison to reliable returns on TD's, I just ran with it!

By your apparent and expected flip flopping, it's therefore not a comparison. TD's are therefore the safer option in these uncertain times. Capital gains are unbanked. I notice you repeatedly omit that along with interest, insurance, rates and maintenance.

Well done :)

by Joe Wilkes | 5th Jul 19, 9:45am 1562276749

Hi Zachary.

I’m not so sure if landlords were always simply thinking about rental income when they made some of these purchases late in the cycle in Remuera.
Data From April, assuming 52 week occupancy at listed rental price, not accounting for associated costs of rental, insurance and management costs. Looks to me like a lot of later investors were not thinking about yield but speculating on their capital positions. Gross yields calculated against initial purchase price

https://www.dropbox.com/s/x7geovhegou7mtt/Remuera%20Rental%20Properties…

by Glitzy | 5th Jul 19, 10:29am 1562279367

JW, I'd agree with you. The real juice in rental places is the capital upside. After you have paid rates, insurance, ongoing maintenance, management fees etc the yield is usually nothing special in urban centres.

This is also why timing the cycle is so important. The folks who have bought in Auckland in 2016 onwards could quite possibly be underwater re capital growth for a decade plus.

by CN | 5th Jul 19, 2:52pm 1562295144

There are many in the residential leasing business who are incurring tax losses and are highly leveraged - they finance the cashflow shortfall from their employment income. If there is a recession, and they lose their employment (or have lower wages due to reduced hours worked), they may be unable to continue debt payments, and be forced to realise the capital loss ...

Those at the highest risk are those employed in the real estate, construction, & retailing sectors.

by CN | 5th Jul 19, 1:47pm 1562291256

One area of concern regarding property investors is that in the 2016/2017 tax year, there were 116,000 tax filers who claimed tax losses resulting from rental property ownership. (Refer http://tenancieswar.nz/other/loss-ring-fencing)
1) the average loss claimed was $7,138, which means a total of $828,008,000 of losses.
2) assuming little non cash expenses such as depreciation, this is cash that has to be paid from household budgets.

If these rental property owners experienced unexpected financial cashflow strains, then that is likely to increase financial pressures. Some potential areas of cashflow strains:
1) costs to meet Healthy Homes Guarantee Act requirements
2) interest only mortgages that are converting to P&I mortgages - in some cases debt service payments could increase 30-40%.
3) potential ring fencing of losses from rental property operations

There are also rental property owners who are profitable from a tax perspective, yet the property is also currently a cash burden on household budgets. The negative cashflow arises from the required payment of principal of the mortgage payment in a P&I mortgage. As the investment property is profitable, they also need to pay tax at the end of the year, so this results in further cash outflow on top of the debt principal payments made during the year- I have heard some stories of property investors in this predicament.

There are also rental property owners who are profitable from a tax perspective, and the property is currently cashflow positive due to interest only financing. If that interest only mortgage becomes a P&I mortgage, then the debt payments may result in the rental property now becoming a cash burden on household budgets. Remember when these mortgages were taken out in 2015 / 2016 when there were auction frenzies for property in Auckland, many assumed that interest only loans would be rolled over into another interest only mortgage - the credit environment in 2019 is very different to the credit environment in 2015 / 2016.

The 116,000 claiming tax losses on rental property represents about 22% of rental properties owned by private landlords in NZ by my estimates. (i.e. excluding Housing NZ owned properties)

Most of the loss making rental properties are likely to be in lowest yielding geographical locations in NZ, such as Auckland and Queenstown.

by NorthernLights | 5th Jul 19, 2:23pm 1562293402

You must be joking or you should be using the robot to make your financial decisions Zachary

by printer8 | 5th Jul 19, 10:53am 1562280818

No Joe.
Same house; just a better return on your initial investment.
As you well know, short term annual fluctuations in property are totally meaningless and totally irrelevant for a buy and hold property investor.

by Yvil | 5th Jul 19, 11:34am 1562283280

I don't think JW knows that

by HeavyG | 5th Jul 19, 12:44pm 1562287463

JW is on to it... based on his analysis in 50 years the property will be earning around $100k a year and will be worth $10. How'd you like them apples suckers.

by Joe Wilkes | 5th Jul 19, 3:12pm 1562296361

Printer8.
That is assuming they can hold and haven’t over leveraged the farm. Please excuse the dairy sector pun, but given recent sales and share prices moves in that little sector of our productive economy, it demonstrates the dangers of leverage at the margin.

by printer8 | 5th Jul 19, 11:09am 1562281744

As previously posted, increasing rents are the coming housing affordability issue. Growing issue of shortage of rental properties and rising rents will be the continuing story.
Current yields are not attractive to new landlords or those looking to increasing their property portfolios. To maintain supply of rentals as natural attrition of investors occur, there will be upward pressure for rents to rise especially in lack of capital gains.
For FHB, cost of mortgage likely to be same or down for the medium term. For renters, the current 7% increase in rents likely to continue in foreseeable medium term.

by Pragmatist | 5th Jul 19, 12:00pm 1562284845

"As previously posted, increasing rents are the coming housing affordability issue. Growing issue of shortage of rental properties and rising rents will be the continuing story."

Is there? I know they run the stories every late jan/feb about the mad clamour for rentals from unprepared uni students, but is there any actual data on available rentals over time? Currently 1175 3 bedroom houses or townhouses in Auckland on trademe rentals.. nearly 5000 total rentals currently listed. Is that low historically?

by printer8 | 5th Jul 19, 1:03pm 1562288622

How many of the of properties available are indicative of turnover?
Anecdotally I don’t hear of difficulty in letting properties - certainly here in Hawke’s Bay the message is very clear that there is a shortage as rentals are snapped up quickly. From a contact in Auckland I hear the same there.
There again, all the tv news items about people unable to find a house to rent and sleeping in cars, as well as the many “homeless” we see on the streets doesn’t suggest an over supply of affordable rentals.Maybe I should have stated “shortage of affordable properties and rising rents”.

by Pragmatist | 5th Jul 19, 4:19pm 1562300391

Unless turnover rate is varying significantly then i'm not sure it matters, if turnover rate is about the same then any shortage or excess supply will lead to more or less listings for rentals on the market.

Affordability is definitely an issue. But if listings are staying empty then landlords with mortgages to pay will have to drop prices to get cashflow coming in to pay those mortgages.. so we are back to the question, is the number of listings on the market higher or lower than the past?

by mfd | 5th Jul 19, 12:32pm 1562286776

The other way to make new rentals attractive is for prices to fall, as they are in Auckland. I suspect there'll be a combination of the two before the next wave of euphoria among property investors.

by Yvil | 5th Jul 19, 1:20pm 1562289612

"the Auckland region, where the average rent increased by $16 a week (3.0%)"

Don't make things up mfd, it's discrediting you

by mfd | 5th Jul 19, 2:09pm 1562292550

By prices, I meant house prices, not rent. I thought that was clear, but perhaps not. In fact what I said was rents are likely to rise, while prices fall. This is a continuation of current trends in Auckland.

by Yvil | 5th Jul 19, 11:37am 1562283468

Glad to hear you made an extra $1200 in rent Joe Wilkes, how many properties do you own?

by Glitzy | 5th Jul 19, 1:19pm 1562289584

Lol, JW I think you have moved Yvils favorite toy :)

by Yvil | 5th Jul 19, 1:25pm 1562289944

Very educated comment Glitzy, how many properties do you own that qualify you to comment?

by Glitzy | 5th Jul 19, 2:07pm 1562292478

And there was I thinking the screaming reel experience was limited to when i go fishing :)

How about you tell us your answer first along with the value, less any debt of course.

by Yvil | 5th Jul 19, 3:52pm 1562298730

I own both residential and commercial properties in NZ and overseas, I have done so for 25 years, I was cash flow positive 10 years ago when interest rates were 8.5% and 10.5% for commercial. I owe $ millions to the bank and I'm leveraged under 40% overall. Your and Joe Wilkes turn now...

by Glitzy | 5th Jul 19, 3:58pm 1562299102

I'm glad you got that off your chest :) Enjoy your weekend.

by Yvil | 5th Jul 19, 4:48pm 1562302117

You asked, and you failed to reply. Your last 3 posts are all off topic and trying to make fun of me. Grow up, this is a business website

by Glitzy | 5th Jul 19, 5:48pm 1562305734

Yvil, I apologise. I'm still trying to work my way through Rich Dad Poor Dad. I got a copy from the library today. I really like the idea that an investment makes you money but some of the other content is pretty mind blowing stuff. I will make sure I read the whole thing before I return it where I found it in the children's lending section.

by Yvil | 5th Jul 19, 6:15pm 1562307340

Still using sarcasm to conceal your lack of substance

by Glitzy | 5th Jul 19, 6:55pm 1562309716

Yvil. Please don't be so sore. If you like Rich Dad Poor Dad l have a great recommendation for some fiction. There is a series by Enid Blyton called The Famous Five.

There's one novel called Five on a Treasure Island. It's definitely something you'd enjoy.Take your time and tell me what you think when you finish it.

by Nzdan | 5th Jul 19, 7:59am 1562270373

Unintended but foreseeable consequence of legislating against Landlords? Average increase of 7.6% across New Zealand, how many people received a 7.6% pay rise last year? What a great time to be renting.

Meanwhile I went floating on my mortgage this week, refixed at 3.85% (down from 5.5%). As a result, my "rent" was reduced by 15%.

by Pragmatist | 5th Jul 19, 8:30am 1562272206

Yet, when I run the numbers on this place, if the landlord put 30% deposit down when he purchased it, at 3.85% over 25years, our rent is still $150/week short of covering the mortgage. Let alone rates and insurance etc. $70/week if you go for a 30y mortgage.

And if you trust the homes.co.nz estimate, he's also lost about $1500/month in value, despite buying it for $50k under RV in late 2017.

Man, I wish I was an Auckland landlord. :P

by Cowpat | 5th Jul 19, 8:56am 1562273791

Average outstanding mortgage on a rental property is between 110000 to 125000.

by Pragmatist | 5th Jul 19, 9:13am 1562274813

sure, if you are talking about properties bought a decade ago, and include all of NZ .. This one was purchased late 2017, and is Auckland (overpriced housing capital of NZ.)

Even so, if he did only have $120k mortgage on the place that would simply mean his ROI (rent - mortgage repayment on the $120k mortgage) on the ~$800k he had invest was about 2.1% after rates and insurance. Less than term deposit rates.

by Cowpat | 5th Jul 19, 9:24am 1562275464

Pragmatist, I just threw the numbers out there. Interests numbers point to rent costs on a flow basis running at 4 times our current annualised CPI measure. With mortgage costs at historical lows, one section of our society is being nailed. We can show the world our "well being budgets and measures " but in reality they are meaningless.

by Pragmatist | 5th Jul 19, 9:36am 1562276164

Yes, on a flow basis, but there is no accounting for the quality change. With all the new housing construction some of those people will be moving to better quality houses, fair enough that a better quality house costs a bit more.

Yes, things are very grim at the bottom end, and I don't really have much faith this govt has done much useful to address that. Healthy homes standards are a good start, but far from enough. I still think we (at least in Auckland) are in a correction (thankfully a slow one), and things will sort themselves out in a few years if nothing much changes in the local economy. Just keep on with the state housing build as fast as they can and move more and more people out of subsidised private rentals and it'll sort out the shithole rentals out there. Stopping/severely curtailing immigration for a few years would also help.

by Nzdan | 5th Jul 19, 9:50am 1562277010

Does the Landlord have a mortgage? But you're right, I wouldn't want to be an Auckland landlord.

by Pragmatist | 5th Jul 19, 10:35am 1562279717

Yes, he definitely has a mortgage (but no idea how big it is), I remember getting a call when we were dealing with the paperwork before we moved in saying he needed the signed tenancy agreement back (slack letting agent to blame for that one) to get his finance approved.

I'm not worried about our landlord, he has other rentals which he's owned for years, so are no doubt in a much better position, so his portfolio overall is probably doing fine.

by RickStrauss | 5th Jul 19, 10:17am 1562278643

If that were the case you'd see the same thing in Auckland, surely. Potentially more about the lag in supply following importation of an extra 500,000 people in to New Zealand, and the overflow out of Auckland into other areas. Also, increased subsidies to landlords via the Accommodation Supplement and WFF?

by dictator | 5th Jul 19, 10:52am 1562280765

The best time to be renting was when a savings account paid 8-9% interest and rents were low. Now, paying a mortgage has a much better yield. Although it's reached the point where investing the money is a better idea, and any interest rate cuts are going to my pocket these days.

by Yvil | 5th Jul 19, 11:36am 1562283382

"Unintended but foreseeable consequence of legislating against Landlords?"
Absolutely NZDan

by Cowpat | 5th Jul 19, 8:31am 1562272294

Greg , any reason for variation between Interests and Stats NZ rental figures for percentage change in flow of rental prices. Both appear to use the same MBIE data .

by Greg Ninness | 5th Jul 19, 9:37am 1562276239

Hi Cowpat,

I suspect the differences are mainly to do with timing.

The latest Stats NZ figures I can find are for April, whereas ours are for the June quarter.

Even so, the latest quarterly Stats NZ flow figure for Auckland is a 2.4% increase, compared to our figure of 3.0%, and the Stats figure for Wellington is 11.3% compared to our figure of of 11.1%. And then we give a greater district breakdown of the figures than Stats does.

There are also timing factors caused by delays between the time a landlord receives a bond from a tenant, and when that money is lodged with Tenancy Servcies and processed by MBIE. I suspect many of the bonds on the Q2 data were actually paid by the tenant in Q1, which would create a bit of lag betwen the market and the data. Q1 is usually the busiest quarter of the year for new rentals and I would expect most of the annual increase to occur in that quarter (in a rising market) and then slowly flow through to the rest of the market. But that may not show up fully until the Q2 data is available.

by Cowpat | 5th Jul 19, 10:22am 1562278943

Thanks for your time Greg. Stats NZ have their May numbers at 3.9 percent nationwide on a flow basis with June data next week. With time the two numbers will most likely converge . July 16 will provide an interesting number given the weighting of rental accommodation in the CPI.

by nymad | 5th Jul 19, 12:24pm 1562286274

It's to do with index construction. Stats NZ index is pseudo constant quality. The averages that interest use are the reason for the discrepancy.

If you are going to use MBIE data and not adjust for quality, best to use the geometric mean, not the arithmetic mean. This is due to the pricing bias - I.e. rents are typically intuitive, round numbers. The geo mean somewhat mitigates this issue.

by brisket | 5th Jul 19, 9:33am 1562275993

Looks like we're still seeing the effect of the price ripple from Auckland outwards, as we have with house prices.
It won't last.

by Yvil | 5th Jul 19, 11:41am 1562283696

Like CJ, you're assuming house prices & rents always move together, they don't, they respond to different forces

by Pragmatist | 5th Jul 19, 12:04pm 1562285043

Both respond to demand.. and as Auckland rent and house prices stagnate (or even decline) the impetus for people to leave Auckland and move to the regions will wane, reducing demand, reducing ability to jack up rents in the regions.

by Yvil | 5th Jul 19, 1:27pm 1562290077

"The Auckland region, where the average rent increased by $16 a week (3.0%)" Are you saying Auckland house prices are up? No, so there's your pragmatic answer

by Pragmatist | 5th Jul 19, 2:07pm 1562292443

*sigh* why would I bother..

by Yvil | 5th Jul 19, 3:54pm 1562298868

Cause you know you're wrong

by Pragmatist | 5th Jul 19, 4:47pm 1562302063

Yvil driving down the road looking only in the rear view mirror: "So far i've managed to drive in a straight line with no problems, therefore I will always manage to drive in a straight line..
Pragmatist standing on the side of the road watching Yvil speed towards a curve in the road with a large embankment.: "Oh, this could get messy.."

by CJ099 | 5th Jul 19, 4:54pm 1562302483

Let him crash ;)

by CJ099 | 5th Jul 19, 5:30pm 1562304628

Honestly Pragmatist, he's not worth it, if Yvil can't even figure out simple supply and demand. Even the figure in the above article reflect that rents are not increasing that much where property prices are falling, they're already heading in to a rental price stagnation stage.

by Yvil | 5th Jul 19, 6:26pm 1562308011

You're unbelievable CJ, even with this article stating:
"There has been strong growth in residential rents in the last 12 months"
and "THE RATE OF INCREASE IS ALSO ON THE RISE".
You still manage to post
"they're already heading in to a rental price stagnation stage"

Why do you read these articles if you totally disregard the content and prefer to make up your own fairyland "reality"

by CJ099 | 5th Jul 19, 7:40pm 1562312446

Sad Yvil; did you miss the details about rents not increasing in the expensive tap out areas such as Auckland; Rodney which was the lowest percentage increase in the country, 1.9% in Auckland’s central suburbs and 2.2% in Manukau.
The FACTS speak for themselves, as property prices fall then so will rents, how do I know this - well apart from standard logic, I've been through it before in the UK during the GFC.

by CJ099 | 5th Jul 19, 4:57pm 1562302659

by mikekirk29 | 5th Jul 19, 10:29am 1562279388

Mortgages dropping in terms of interest, rents rising. Poor and bottom 50% of earners are renting. Their propensity to consume drives consumer growth. Auckland and increasingly Wellington cost of buying driving people to continue renting longer. At same time government just passed law that restricts landlords ability to offset losses against tax, a disincentive to rent out property. Hence rents will rise further and rental sector will have more demand, etc, repeat. Investors will be throwing towel in in numbers in next 6m at precisely the time that developers are struggling to get sales off the plan to accrue revenue to meet debt payments. The end of the housing cycle approaches but could be along segment with growth declining. NZ government does not seem to see what happens (see Australia panic right now) when housing market goes down pan. GDP will decline faster than expected in next 6m and government will not have money to spend as it did. So, welcome back National

by CJ099 | 5th Jul 19, 5:44pm 1562305494

I must admit it's fascinating to watch, But even if National got in for the next election how are they going to improve our GDP?? I guess they could lift the Foreign Buyers Ban and continue selling off NZ to the Chinese and recreate their False Economy, Oh but wait.... They can't get their money out of China that's why both Australia and Canada's property markets are also in this pickle and sliding down the pan.

I can't see China lifting their Capital Flight regulations in the next few years can you.

by flebus | 6th Jul 19, 9:51pm 1562406686

They'll increase GDP the way they always do, by stuffing boatloads of mostly low skill, low pay immigrants from the third world into the same New Zealand sized bag.

by Nzdan | 7th Jul 19, 12:54am 1562417674

But New Zealand is dufferent. Our GDP increases every time John Key gets a chubby.

by mikekirk29 | 5th Jul 19, 10:34am 1562279641

AND no one is building good quality stuff for reasonable (subsidised rent).
Which is what is needed.
As Mr Trotter said other day, providing such property for rent would reduce demand in bought sector and hence values would drop , helping FHB.
But that would cost people who are looking at their paid up house valuations, and they vote more, so government will not do what is needed to help their (believed to be) constituency.

by Pragmatist | 5th Jul 19, 10:45am 1562280350

The housing NZ stuff going in at Roskill South is precisely that. All new builds, look okay from the outside, haven't been close enough to check out the quality.

https://mtroskillsouthdevelopment.co.nz/

Just need to ramp it up (if they can find workers)

by Houseworks | 5th Jul 19, 6:58pm 1562309881

"AND no one is building good quality stuff for reasonable (subsidised rent)."
Translation, your rental costs you more than you would like to pay but theres nothing in your preferred price range :)

by Yvil | 5th Jul 19, 11:25am 1562282744

by CJ099 | 3rd Jul 19, 7:49pm

TTP you're forgetting the laws of logic. As house prices fall and become more affordable so to rents. Old supply and demand, watch and learn

by Yvil | 5th Jul 19, 11:25am 1562282707

by Yvil | 4th Jul 19, 3:03pm

Rents fall because house prices fall? Yeah right, definitely flawed logic

by Yvil | 5th Jul 19, 11:27am 1562282868

These are copies of our convos of yesterday, maybe you can "watch and learn" something yourself as you say?

by Pragmatist | 5th Jul 19, 11:50am 1562284210

Talking to yourself? Oh well, at least you aren't lonely with all those different voices in your head... :)

by Yvil | 5th Jul 19, 3:59pm 1562299194

I thought for a pragmatic type of guy, you'd like facts rather than opinions, I guess I was wrong (the first quote is from CJ, you may have missed that)

by Pragmatist | 5th Jul 19, 2:09pm 1562292566

I'm perfectly capable of doing my own cherry-picking thank you very much. :)

by CJ099 | 5th Jul 19, 4:57pm 1562302639

Yvil, What you have failed to calculate is that property prices haven't fallen enough yet in Auckland (Which is where I was referring to in the comment you copied and pasted). To tip the supply and demand balance. As the property prices continue to drop (in Auckland) that means that far more FTB's can purchase a home rather than rent (We're currently seeing that trend). When the demand for rental properties drops so do the rental prices along with their yields. Very simple math.

by FamilyGuy | 5th Jul 19, 12:19pm 1562285941

6 Standen Avenue, Remuera, Auckland, 1050
CV on July 2017: 2.25 million
sold on Dec., 2017: 2.35 million
sold on April 2018: 2.35 million
on the market again, not sure if the current owner would take a haircut :)

by CN | 5th Jul 19, 2:18pm 1562293132

Looks like property traders / would be property developer could get caught out.

by Pragmatist | 5th Jul 19, 5:18pm 1562303937

where does the sold Dec 2017 data come from.. Homes only shows the April 2018 sale. Sold Dec 2018 but settlement happened in April maybe?
I bet the seller is hoping to get the homes.co.nz estimate, and not the trademe one.. Trademe Insight is a property bear :P

by FamilyGuy | 5th Jul 19, 12:25pm 1562286311

1A/8 howe Street, Freemans Bay

CV (2017): 1.5 million
sold on Sept 2018: 1.7 million
Back on the market to reap big gains or haircut :)
cheers.

by Nzdan | 5th Jul 19, 1:36pm 1562290579

Renovated the kitchen. New handles on the ranch sliders. Lightly renovated the bathroom.

by WhenwillitEnd | 5th Jul 19, 12:32pm 1562286776

Can someone tell me what is happening in Dunedin? Tons of rentals available. Nearly 600 on trademe for rent, but only 223 properties for sale. Yes, some of those available rentals are student flats where there is an existing tenancy & so only available for new tenants in January. The usual seasonal thing. But a heck of a lot aren’t! some have been sitting there available now since May. Yet asking high rents still.

by Zack Brando | 5th Jul 19, 12:39pm 1562287173

Yeah Boi !! It's good to be a renter in QuakeCity yo'll !! We have standards here, we build houses here .. WE Understand that renters also play a part in price discovery .. we vote with our bank accounts HERE !!

ha ha haha har.

by Camel's back | 5th Jul 19, 1:03pm 1562288593

High rents are half the inequality problem at present. High rents are a disease.

by Yvil | 5th Jul 19, 1:32pm 1562290323

It is a problem for many indeed. Spending 40% of the wages on rent is far too much

by Camel's back | 6th Jul 19, 2:04pm 1562378656

Yes indeed... how about 50 or 60%?

by delboy | 5th Jul 19, 1:23pm 1562289823

It’s natural rents will increase whenever accomodation supplements, benefits and minimum wages increase.

This will change when rental supply exceeds demand.

by Davo36 | 5th Jul 19, 2:11pm 1562292684

I'm a horrible landlord who had the audacity to convert some disused office space into 3 apartments in 2010.

Since then, for my sins I've:

1) Had to pay for any 'accidental' damage to my properties since you know, tenants are like children i.e. irresponsible,
2) Been unable to claim depreciation and had to change from a LAQC to a LTC.
3) Had increased insurance premiums (due to insurers losing heaps in the earthquakes I imagine).
4) Faced increased local government rates, but of course, no increase in service.
5) Now had losses ring-fenced. This actually doesn't affect me as I have never negative-geared.

And soon my tenants will be able to have pets, alter my premises and smoke P in my properties. And of course I won't be able to remove them without an explicitly stated good reason - which the wonderful Tenancy Tribunal will decide on.

So are my rents increasing? You bet ya. Every single chance I get. To the maximum. And the apartments are full all the time, basically no vacancy.

If the powers that be are going to increase LLs costs, we'll simply pass them on.

by Zack Brando | 5th Jul 19, 2:31pm 1562293865

Cry Me a River !!:

1. Housing is a consumer product, it is consumed as people live in it - minor damage is irrelevant, that's why bonds and the concept of due diligence exist.
2. Poor you, not being able to claim depreciation. Pretty sure everybody knows housing deteriorates over time. You don't need a high understanding of thermodynamics to get that one. When clothes wear out, I don't cry myself to sleep because I can't claim depreciation.
3. If you choose to hold property in earthquake prone areas, why should the rest of NZ subsidies your decision?
4. Rates reflect the cost of running your city, vote better or hold property in less profligate cities.
5. Ring-Fencing, why should the government subsidize 'investments' designed to run at a loss .. is the accommodation supplement not enough?

MAYBE you just paid too much for your office space and the subsequent conversions ..

Drop Mic.

by Davo36 | 5th Jul 19, 8:22pm 1562314942

1. You say bonds, but I've mentioned the Osaki case, do you even know what this is? Minor damage is irrelevant? How about you let me do some minor damage to your car? Due diligence, yep I pay a very good PM, I don't want to take the risk myself. But no one is perfect.
2. It's just an increase in costs is all. You were never able to claim depreciation on your clothes, so a straw man argument.
3. The property is in Auckland. It's not an earthquake prone area. But insurers want their money back, so they target everyone.
4. I do vote. Less profligate cities, oh yeah? Where?
5. I said this doesn't affect me. Perhaps you didn't read or think about that. Or in fact anything I wrote. Too busy getting angry.

I take it you don't own property. Poor you. Cry me a river.

by Nzdan | 5th Jul 19, 9:07pm 1562317665

You were being very salty in your original post though. Maybe you were meant to post it on the Propertytalk forums but landed here by mistake?

by Davo36 | 5th Jul 19, 9:48pm 1562320132

Hmmm I didn't feel I was being salty, but I can see how it read that way.

It's just so frustrating. The Labour government (and actually National before them) are hammering us LLs. Not to mention the media.

And so we have to increase rents to stay in the same position.

And then the people who vote for Labour jump up and down about how unfair it all is!

To balance things: National did the removal of depreciation and also increased GST by 2.5% during my build. JK of course is on video saying he wouldn't, then did: https://www.youtube.com/watch?v=E3-RYMwJiWA

by Zack Brando | 5th Jul 19, 11:00pm 1562324406

You're the one "jumping up and down about how unfair it all is!".

Like I said, MAYBE you paid too much.

by Houseworks | 6th Jul 19, 6:43am 1562352184

JK was a good PM not a great one based on quotes like that. He was also adept at staying in power and saying what he had to. JA is in the same mould and uses the baby, pregnancy and female factor to advantage.

by Pathos | 5th Jul 19, 5:05pm 1562303136

So, I guess salaries have also risen by similar amounts. Yes?

by CJ099 | 5th Jul 19, 5:26pm 1562304367

Sadly not and that's anther huge risk that Landlords don't bother to account for, that pushing up rents causes the cost of living to dramatically rise. That can put too much wage pressure on business and cause staff to move to other companies that are in cheaper areas and even other countries.

So if you see immigration dropping, companies being bought out or closing in your area, biggest factor or all is if the property markets sliding downwards. Then perhaps you should try to hold on to your Tenants and not increase their rent.

by Retired-Poppy | 5th Jul 19, 6:11pm 1562307095

by THE MAN 2 | 5th Jul 19, 10:27pm 1562322478

Landlords generally should be better off financially than what they were 2 years ago, due to interest rates being lower!
I do believe that with the ringfencing affecting smaller time negatively geared investors, tradesmen will become a lot quieter.
Negatively geared landlords just won’t bother doing necessary repairs and improvements as they won’t be able to get the tax back on them!
We are positively geared on everything so we will continue to look after our tenants and maintain the properties as financially it just makes sense to.
Certainly not a bad time to be a full time landlord with interest rates low and demand for good property in ChCh!

by Pragmatist | 6th Jul 19, 2:12pm 1562379157

"Negatively geared landlords just won’t bother doing necessary repairs and improvements as they won’t be able to get the tax back on them!"

So they'll end up without tenants, or in front of the tenancy tribunal? That'll be way more expensive than just doing the repairs..

by THE MAN 2 | 6th Jul 19, 2:22pm 1562379751

Rubbish!
Why on earth would they end up at the Tenancy Tribunal for not improving their rental property?
You can’t take landlords to TT for not painting a house or not replacing spouting etc.
This ringfencing is going to have big consequences for tenants and the government that they haven’t factored in!

by Pragmatist | 7th Jul 19, 7:09pm 1562483360

I refer you back to your own words.. well one word... "necessary"

by Chairman Moa | 8th Jul 19, 11:45am 1562543139

"We are positively geared on everything so we will continue to look after our tenants"... At the next revolution, all your tenants will be clambering over themselves to save you...