(Some) Auckland rents take a hike

Property

Rents are up by 6.7% in some parts of Auckland, while others haven't risen at all

20th Jun 14, 5:29pm by Greg Ninness

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

Auckland rents have risen by up to 6.7% this year, depending on the type of property and where it is located.

A comparison of rental bonds received by the Ministry of Business Innovation and Employment in May this year with those received in May last year reveals that median rents for most types of properties have risen by a reasonable margin over the year, but with some significant differences.

The biggest overall increases were in Manukau, where the median rent on three bedroom houses rose by $25 a week, from $425 to $450, while median rents on two bedroom flats increased from $330 to $350.

Out west the median rent on a three bedroom house in Waitakere rose from $400 to $420, on the North Shore it went up from $495 to $510 and in Rodney it rose by $20 a week, from $430 to $450.

But in Central Auckland, the area defined by the boundaries of the former Auckland City Council, rent movements were more mixed. The median rents on three bedroom houses showed no movement at all and remained at $550 a week.

But the median rents for two bedroom flats (which include subdivided houses and small blocks of home units) posted the biggest gains of all, rising from $370 a week to $395, an increase of 6.7%.

One bedroom apartment rents also rose strongly, from $350 to $367.

The rises will put put pressure on many tenants, especially as some of the biggest increases have occurred in areas where many people with low incomes live, such as Manukau and Waitakere.

But it will mean many landlords should have achieved rental income growth of around 5-6% over the last 12 months, which will be a relief to many who have already been hit by the rising costs of insurance and rates on their properties and are now facing of rising mortgage interest rates.

Auckland Rents
	Median rent. $ per week.
	May-13	May-14	% Change
Rodney 3 brm house	430	450	4.7
North Shore 3 brm house	495	510	3.0
Waitakere 3 brm house	400	420	5.0
Auckland Central:
1 brm apartment	350	367	4.9
2 brm apartment	450	460	2.2
2 brm flat	370	395	6.7
3 brm house	550	550	0.0
Manukau:
3 brm house	425	450	5.9
2 brm flat	330	350	6.0
Papakura 3 brm house	380	400	5.3
Franklin 3 brm house	370	380	2.7
Source: Building and Housing: MBIE

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19 Comments

by BigDaddy | 20th Jun 14, 8:36pm 1403253387

Olly Newland warned of this last year, another of his predictions coming true.

Rising interest rates will also be passed on, adding fuel to the fire.

For many, the future means being tenants for ever.

See it here:

http://www.interest.co.nz/property/66656/property-investor-olly-newland…

by gordon | 20th Jun 14, 9:35pm 1403256929

BigDaddy when you mention Olly's name I can only think of the word Landmark. Thank heavens Olly is repaying all the investors who backed him in that fiasco.

by keywest | 21st Jun 14, 1:45am 1403271935

What do you mean if you ave to pay an extra $25 a week in rent you now cant save for a house. Even a modest salary increase frmo a $40k a year job might see you earn an extra $25 dollars a week so that more than covers it. But if you are paying too much in rent now (e.g. living in Ponsonby - when you should be living in Waterview) then of course you will never save enough money for a house. The only people that can not save enough for a house (that are able bodied & can work) are always the same people and they will NEVER buy a house...nothing has changed since we moved into caves when we came in from the jungle.

by gordon | 21st Jun 14, 7:43am 1403293431

The increase in rent for some landlords will mean they are back to getting a 3 per cent return on capital. That is great news for them.

by gordon | 21st Jun 14, 10:10am 1403302253

Like shares Kimy assets are only worth a certain value when you have sold them and the money is in the bank. I can just imagine you in bed with a calculator thinking about what your properties are worth if in fact you have any. One's mind is an amazing thing. It imagines and dreams. Things can change so easily. Just how many houses and apartments are empty in China? What would happen to the world economy if China tanked? It pays to be diversified.

by gordon | 21st Jun 14, 10:35am 1403303703

When times get tough Kimy houses are much harder to sell than shares. No paper with shares now but you would not know that as you are not diversifed. My company does not build houses. Rather it just develops and sell sections which has gone very well in the last two last years.

by spottie | 21st Jun 14, 12:02pm 1403308947

gordon

I never try to discuss the sharemarket with people such as kimy, aka Zanyzane.

Us investors rely on such ignorance to keep the competition from other buyers down; hence retaining larger profits for the likes of you and I.

by KH | 21st Jun 14, 9:04am 1403298268

Increases starting at the lower end. How does this cycle ? Will increases next start to show on higher priced property?

by spottie | 21st Jun 14, 9:59am 1403301570

Any rent increases which flow straight out due to higher costs is bad news for landlords.

by Simon | 21st Jun 14, 12:08pm 1403309302

I'm putting mine up 3.4%, first for a little while. I'm fixed out to 2016-2018 at on average under 6% so OCR rises go un-noticed.

Yields already 6.5% net (after rates and insurance) in p.n so rent increases just mean more profit. At 80% loan to value, return on the 20% equity invested is at 9% on cash flow basis alone, no capital gains considered.

Probably look at doing some maintanence before end of financial year to reduce profit and tax paid (essentailly get a 33% discount on any maintenance expenses this way), and if I think market rent should be higher after maintenance I'll prob hike rent again.

Growing city with yields like this, money for jam.

by Simon | 21st Jun 14, 2:31pm 1403317912

15mg zopiclone normally does the trick...

But seriously, the thing I like about property investing is the control you have.

I vet tenents myself. Personally meet them and talk to them. Ring up referees and get a true feel for what they are like.

It's no diff hiring employees for a business.

If you don't get it, or find this too hard, then I recommend you and your friends stay out of property investing, or infact any business en devour that means taking responsibility for risk mitigation

by spottie | 21st Jun 14, 5:45pm 1403329505

"But seriously, the thing I like about property investing is the control you have."

I would have thought the experiences of tens of thousands of people in Christchurch, regarding the responses to the earthquakes, would have shown the naivity of this statement.

by Simon | 22nd Jun 14, 7:33pm 1403422435

Emotional, subjective assessment of things will get you no where. Lets crunch some numbers.

8000 houses red zoned out of say 130,000 houses in chch. Houses not red zoned have seen massive increases in both value and rental income. Chances are 6/100, or 1 in 16 that your property is red zoned.

Assume a property portfolio across chch of 16. Red zoning 1, and having the 15 others go up in value 30% for both value and rent return would still see you well ahead overall, even if pay out for the one red zoned is less than ideal, delayed, or whatever.

Again risk management. Don't invest 100% in the same suburb of the same city/town. Dont even invest purely in NZ property. Hedge against NZ property by investing in USD JPY, or as I prefer stocks in these countries.

by spottie | 23rd Jun 14, 7:18am 1403464703

You appear to believe the repair and remeadiation of the non red zoned properties is all happenning to the satisfaction of the owners.

Not to mention the contant flooding during normal rain now being experienced.

There are many ChCh property owners now feeling totally trapped in their "livable" non repaired properties who are suffering enormously due to 3 years of battles and stress.

They are worn out and feel they have no control at all over their lives due solely to being a property owner.

by Triple | 21st Jun 14, 5:46pm 1403329588

This article is a load of rubbish!

"Rents are up by 6.7% in some parts of Auckland"

"Median rents for properties have risen by a reasonable margin over the year"

This is meaningless drivel.

What is the average increase in gross return for rentals across the Auckland Region for the last 12 months?

Whats is the average amount to which costs have risen for these rentals across the Auckland Region. e.g. insurance, rates, maintenance, etc.

Here's a question for you Greg - please tell me, what is the average increase in net return for rental properties in Auckland over the last 12 months, and the last 3 years?

by Triple | 21st Jun 14, 6:05pm 1403330707

BTW - Ray White listed over 90 properties in Auckland City on trade me yesterday in one hit, - most were apartments. It looks like a few investors are cashing up and saying, "hatsa la vista, baby".

I've also had multple calls this week from real estate agents in the Bays (B&T and Baileys) saying, "we have a distressed vendor, please make an offer...."

I wasn't receiving such calls last year.

Has something changed???

Yes, the market has slowed dramatically, and anyone who denies it is a liar!

by steven | 21st Jun 14, 6:34pm 1403332474

I wonder if some speculators are cashing up in case labour wins. The market seems to have gone flat anyway so why not bail out for a bit...

regards

by steven | 23rd Jun 14, 2:39pm 1403491166

Oh dear, meds low?

Hey, Im not saying labour WILL win. I regard Labour as at best marginally better than National.

regards

by Triple | 21st Jun 14, 7:00pm 1403334030

I think the market driver has always been the Asian buyers - whether new NZ citizens or foreign buyers (and i'm not being racist, I'm just stating the facts which anyone who attends auctions already knows).

It appears Aisan buyers are no longer so abundant and perhaps some are cashing out.

Here are a few possible reasons to spook Chinese buyers/investors:

there are over 50 million vacant homes in China at present.
2014 home sales for Beijing are down 35% (Jan to May) on 2013.
the Chinese government are toying with a new property 'recurring tax' system which could create devastating holding costs for vacant household units - see link (http://blogs.piie.com/china/?p=3785)

These are big reasons to spook Chinese buyers.

I think if you take away or drastically decrease the Asian buyers in Auckland, then property prices will fall significantly.