Big jump in key Auckland rental rate

Property

Median weekly rent for three bedroom Auckland houses surged NZ$55 to NZ$550 in February

12th Mar 12, 4:16pm by Gareth Vaughan

By Gareth Vaughan

The weekly median rent for a three bedroom Auckland house jumped NZ$55 during February to reach NZ$550, the highest level since interest.co.nz started tracking the data six years ago.

February is traditionally a busy month in the rental market as the summer holiday season ends and tertiary students return to their studies.

However, the February move this year easily outstrips anything seen in the month of February since interest.co.nz started tracking the data in January 2006, with NZ$550 also the highest weekly median rent for an Auckland three bedroom flat recorded over those six years.

The data is the weekly median rent based on bonds registered and comes from the Tenancy Bond Service of the Department of Building and Housing. The Auckland median covers the old Auckland City Council area.

In February last year the weekly median rent for a three bedroom Auckland house actually fell NZ$3 from January to NZ$462. In February 2010 it was unchanged at NZ$450, it rose NZ$3 to NZ$450 in February 2009, rose NZ$5 to NZ$430 in February 2008, was up NZ$5 to NZ$400 in February 2007, and was flat at NZ$390, month-on-month, in February 2006.

Despite the rise in the median rent for three bedroom Auckland houses, or perhaps because of it, the number of rental bond transactions has been trending lower. (See chart below).

Meanwhile, figures from Crockers Property - based on Real Estate Institute of New Zealand and Department of Building and Housing data - show January weekly median rent prices for three bedroom houses in Auckland suburbs ranging from a high of NZ$715 in Ponsonby to a low of NZ$340 in Papakura and Pukekohe. The Ponsonby figure is up NZ$75 year-on-year with the Papakura figure unchanged and Pukekohe up NZ$10.

Among specific suburbs In West Auckland - Glendene, Glen Eden and Massey - it was up NZ$20 year-on-year to NZ$370, up NZ$60 to NZ$540 in Takapuna and Milford, up NZ$90 to NZ$525 in Point Chevalier and Mt Albert, up NZ$10 to NZ$460 in in One Tree Hill and Ellerslie, and up NZ$60 to NZ$490 in Howick, including Bucklands Beach and Botany.

House prices also rising

The strong rise in median Auckland rents comes with house prices also at historically strong levels. Barfoot & Thompson, Auckland's biggest real estate agent, said last Monday it sold more houses in February - 764 - than in any February since 2007 - 1,033 - with the average price up 1.2% from January to NZ$536,069. And the latest figures from government owned property valuer Quotable Value show values in the Auckland region increasing faster than in any of the other main centres, up 2.1% in the three months to January, and up 5.1% year-on-year to NZ$527,617, to be above the previous - 2007- market peak by 1.9%.

Meanwhile, the weekly median rent for a two bedroom Auckland flat rose NZ$10 in February from January to NZ$360, taking it back to the high recorded last November.

In Wellington the weekly median rent for a three bedroom house rose NZ$5 in February to NZ$480, which takes it back to the level reached last March, the highest in interest.co.nz's six-year database. In Christchurch it was unchanged at NZ$350, again the highest level in the six year period covered.

For two bedroom flats, the Wellington median rent was up NZ$10 month-on-month to NZ$340, although this is shy of the NZ$345 of February 2011. And in Christchurch the two bedroom flat median weekly rent was unchanged at NZ$250 in February, well shy of the NZ$280 recorded in August last year.

The national three bedroom median rent was unchanged at its high of NZ$330 in February, and the national two bedroom flat weekly rent median was up NZ$5 to NZ$265, although this is below the NZ$270 peak of February 2008.

No chart with that title exists.

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30 Comments

by Gloom | 12th Mar 12, 4:33pm 1331523194

I hope my landlord will not increase rent. When you are behine, you will be behind forevery.

by SK | 12th Mar 12, 4:38pm 1331523496

Well well, perhaps Olly's 200 years of experience means he actually knows what he is talking about?

The dinosaur told you so.

(as did I)

by BigDaddy | 12th Mar 12, 5:41pm 1331527291

Yes Olly does know what he's talking about and the smuggeroos who have posted here in the past will all regret their words.

Olly spoke recenty at the Rotorua Property Investors Association conference. It was a standing room only affair when far more people turned up then were expected

Women fainted and men fought tooth and nail to get close to the stage as the sound system failed through over loading and inability to cope in the heat and crowding.

It made head lines in the papers the next day:

http://www.rotoruadailypost.co.nz/news/silver-linings-be-found-economic…

by Matt in Auck | 12th Mar 12, 8:15pm 1331536533

Olly / BigDaddy

Let's see how glib you are at the end of 2013 when your mid / late 2011 prediction of rents doubling in a couple of years will fail miserably. Wonder how many naive investor suckers got sucked in by that ridiculous pronouncement?

Oh, but you are a cunning little fox because then you'll claim "a couple of years" is a generic description which could mean, let's just say, 4-5 years. Or why not 6 or 7 years

Therein lies the tricks of schemers. Keep things vague and ambiguous enough and you'll cover your ass

by Silversurfer | 12th Mar 12, 9:18pm 1331540308

Rents doubling in two years!! Yeah that could happen as renters have an infinite supply of money.

by blue maomao | 18th Mar 12, 12:40pm 1332027610

hard to fathom how gloating over the price of shelter could be so satisfying.

by SimonP | 13th Mar 12, 12:26pm 1331594818

I was tempted to come along and heckle but that would mean paying $45 for Olly's pearls of wisdom. Back in 2006 and 2007 PIs were buying and selling property to each other in Rotorua but now they have all gone. Some still exist from the final round of musical chairs so they presumably turned up to have their prayers answered at Olly Newland's ministries. In the real world, auctions never reach reserve and local real estate agents seem quite despondent about running open home after open home with no interest. House prices are down 17% nominal since 2007 on the limited transactions that occur as the disconnect between buyer and seller widens.

by Wolly | 13th Mar 12, 12:33pm 1331595237

Any bank would have loaned you the $45 simonP

by Gummy Bear Hero | 13th Mar 12, 2:20pm 1331601621

...... no , only $ 42:75 of it Wolly .... you gotta stump up the remaining 5 % yourself .......

by Wolly | 13th Mar 12, 2:59pm 1331603959

sod it...but hey no gst...cos it's not a good and printing it is not a service and nor is lending it...woopeeee

by muzza | 12th Mar 12, 7:32pm 1331533956

Olly, Big Daddy, SK, fat chance you guys are ever going to convince the detractors, it's in their DNA, so why waste your breath?

by DC | 13th Mar 12, 12:25am 1331551514

I hope my rent doesn't go up anymore. Where will house price and rent increases end?

by Your Landlord | 13th Mar 12, 1:23am 1331555033

We have had several years of many people on this site saying house prices will collapse.

But with rising incomes from property, the collapse of house prices is now even further away.

The stats in this article mirror my experiences of rental increases in Auckland. I am also seeing increases in provincial cities, but not of this magnitude.

A few months ago on this site I "rang the bell" for Nick Arrand, telling him it was then the bottom of the housing market. Did he listen?

by SK | 13th Mar 12, 8:25am 1331580351

http://nicholasarrand.wordpress.com/

looks like he has finally given up.

"But the property hobby-horse I have been riding over the last 4 years has become tired; flogging it is going to take me no further at this stage."

by Your Landlord | 13th Mar 12, 1:26pm 1331598392

SK thank you for the notice about Nick A's site.

by Vera Fayed | 13th Mar 12, 2:46pm 1331603164

Poor old Nick. All that work and not one single person ever made a comment on any of his posts.

by raegun | 13th Mar 12, 8:35am 1331580910

Until such times as house prices and rentals, and land prices bear some relation to the incomes of most people here, we will remain in the poo. Either foreigners don't get to buy this stuff or a capital gains tax, at least on non-resident foreigners, is imposed. I don't give a flying you know what if that would be discriminating against them as our laws as they presently are, are discriminating against us, time to change them.

by Wolly | 13th Mar 12, 8:42am 1331581349

And how is the rental supplement ( landlord subsidy) calculated?

by BigDaddy | 13th Mar 12, 9:52am 1331585525

Rents for the average $500K Auckand house would have to reach $800 per week to be viable

and the maths are simple.

Assuming a $400K P & I mortgage at 5.9% = $28500 p.a. approx.

Add rates at $2500, Insurance at $1500 and R & M at $2000 we get a total of $34,500 or $663.00 per week.

Renting, by all reasonable definition should be more expensive than this to allow for vacancies, higher R & M, plus a fair profit over outgoings not to mention the tenants greater freedom of choice.

So $800 per week rent (and more) for the average home in Auckland is quite on the cards in the near future.

Now if interest rates were to rise... that would be a different story all together..

by Wolly | 13th Mar 12, 10:14am 1331586865

The rent is just the cream on the top...it's the capital gain taxfree that props up the bubble game...backed up by OUT OF CONTROL credit creation, supported by a reserve bank asleep at the helm....who can lose when the pollies are there to make sure the game never stops,

by steven | 13th Mar 12, 10:27am 1331587649

Interesitng calc.... There is an alternative scenario to you assuming the house is really worth $500k.....I would contend its 50% over-valued....

The problem with your scenario is you assume ppl can pay, and indeed some can....but are there enough who can for that many houses worth $500K? time will tell. If there are not, then rents can only be set to what ppl can pay....if say there are 1000 $500k houses and to get 1000 renters you can only charge $600 well thats says the $500k houses are worth a decent % less than the $500k.

It isnt reasonable to conclude rents should be higher, thats just your wish...

Just what interest rates will do is crystal ball stuff.....as long as inflation is at 2% the OCR will be low and could go lower but if the banks borrowing costs rise so will mortgages....a dis-connect...now if you are thinking ther eis anothe ropportunity to hike rents I think you are day dreaming....

The money thats in ppls pockets is what counts if they dont have it they cant pay it out in rent, somehow you just dont wnat to see this.

In the meantime if a PI is buying a house at $500k thinking its going up.....on those numbers its seems a very risky assumption....and if it starts to drop.....oh dear...wipe out.

I saw this in the 1990s in London....ppl with 10 ~ 14 houses lost them all when there was a downturn and the Irish went back to Ireland....

regards

by bob | 13th Mar 12, 11:34am 1331591674

I don't think it's a 'scenario' or that the post suggests/assumes anything. It's simply a calculation of what rent should be on a 500K house if one purchased it to get an income from the rent.

I don't see rents going to $800 a week in the near future either - but not purely because renters can't afford it (they couldn't afford it a few years ago either and rents have still gone up).

by Ptolemy | 13th Mar 12, 3:59pm 1331607593

So the investor in this scenarios receives no income return on his $100k equity? Why borrow $400k to make this equation look great. Why not just $200k. That would make the equation look more spectacular.

by skudiv | 13th Mar 12, 4:20pm 1331608850

8% yield, you are dreaming, the house would then be worth 800k, and you would be back to 5%, and still dreaming of higher rents. Amazing how people calculate what rents should be then buy according to their fantasy of yield. Letting price be the deciding factor of what yields should be is laughable. Yield is how you calculate price. Then again, I cannot calculate human madness.

by Matt in Auck | 13th Mar 12, 1:17pm 1331597869

funny how Olly supporters seem rather selective in what he talks about:

How about this from December 2011:

If we do have another boom, – and the chances of that are increasing daily- encouraged by continuing low interest rates, plus earthquake rebuilding, leaky home renovation etc then the risk of the bubble bursting followed by a nasty crash seems far more likely than ever before.

So my advice is to tread carefully.

By all means enjoy any such boom. Do all the profitable deals you can find. Make money with both hands but be ready to press the ‘dump button’ at any time. In other words do not get involved in long term speculative projects.

In my view the next boom (when it happens) will be shorter, sharper and could have a very nasty bite at the end.

So he clearly sees a strong chance of a crash at the end of a shorter, sharper boom.

So housing bulls beware, and heed the words of your own prophet!!!!

by BigDaddy | 13th Mar 12, 2:07pm 1331600876

I think Olly is still of the view that a sharpl bubble/boom would be a bad thing.

He believes that a gentle but steady increase in value and rents over several years is the sensible and only true way under the capitalist system.

by Your Landlord | 13th Mar 12, 2:25pm 1331601954

But what these rising rent figures do show is that, for the long time investor in residential property, you do not need capital gains all the time to make money.

An example...buying the average house at the average price in New Zealand in the year 1970 would have cost circa $10,500. By the mid-1990s the rent on that average house had risen to circa $200 per week. So over the course of a year in the mid-1990s the owner would have earned about as much in rent as it cost him to buy the house.

Take many other 25 -35 year time periods and you will find a similar relationship between the original house price and its rental earning capacity.

It's not all about capital gain.

by LAJ | 14th Mar 12, 9:59am 1331672363

When the allowance for depreciation on buildings was removed the property investors association said it would lead to an increase in rents. The Labour party policy of CGT on rentals is also going to push rents up if it comes in, and probably just the thought of it is putting off new would be landlords entering the market which is reducing supply. Current landlords are factoring it into their "rent required" calculations even before it happens as it is likely Labour will eventually get back in and introduce the tax. It is obvious to anyone with any common sense that increasing tax for the provider of a service will lead to a price rise for the consumer. Rental properties are no different.

The earthquakes in CHCH also show the riskiness of rentals is far higher than people had thought so the risk premium required has increased (ie more rents required to make it worth taking the risk).

I'm afraid what is happening in Auckland is no surprise to anyone with a few clues.

by prosperopink | 18th Mar 12, 1:59pm 1332032376

Some of you who sniggered at Nicholas Arrand should listen to this most interesting

interview. Dimitri Orlov and Max Keiser. Maybe there is going to be more to think about

than rental yields and the price of property!

Because "the powers that be" have postponed what should have been natural painful deflation the end result is going to be much worse.

http://www.presstv.com/Program/226128.html

by alishasmith28 | 30th May 12, 6:14pm 1338358458

Now a days rents are too high in each country.So people are taking the decision to buy their own house.Excellent mattresses for sofa beds