House prices may be going through the roof in Auckland but rents are remarkably stable, according to Trade Me Property.
The median asking rent for Auckland rental properties advertised on the website was $500 a week in August, down from the all time high of $520 a week in May, and up just 0.3% compared to August last year.
Over the last year the average asking price of Auckland homes advertised for sale on the website has increased by $88,000.
"While landlords have seen the value of their properties increase markedly, it looks like it has been a challenge to leverage that via rental increases," Trade Me's head of property Nigel Jeffries said.
"That might be tough for landlords with hefty mortgages to contend with but tenants will be pleased to have some respite."
However the figures also show differences in rental growth for different types of homes in Auckland.
Smaller dwellings such as apartments and home units had no or low rental growth, while rental growth was higher for stand alone houses, particularly larger ones (see tables below).
The rental market was also subdued in Christchurch, with the median asking rent on 1-2 bedroom houses falling from $380 a week in May to $330 a week in August, and the median asking rent for 3-4 bedroom houses dropping by $50 a week, from $490 a week to $440 over the same period.
"This is largely down to supply as a large number of new apartments have hit the market recently, soaking up the demand form tenants," Jeffries said.
However outside of Auckland and Christchurch rents were growing strongly in many areas.
The biggest increases in median asking rents over the last 12 months occurred in the Bay of Plenty where they were up 20% in August compared to August last year, followed by Gisborne +19.6%, Manawatu/Whanganui 17%, Northland +11.5% and Otago 11.1%.
"Tenants in the Bay of Plenty are paying approximately $3500 more a year for their rental property than they were a year ago," Jeffries said.
"The region's median rent has hit $420 a week, the same median weekly rent as we see in Wellington."
36 Comments
Very strange that rents come down when there is such a big property shortage. How many thousand homes do they usual quote ? 10,000 short ? 20,000 short?
Perhaps there isnt such a large shortage afterall and it is just media hype to fuel the bubble ?
Consider the stable rents in addition to the thousands of empty homes.
Yes supply is tight however perhaps just tight enough to be meet by the demand from the marginal buyer ie the foreign buyer (stud, temp). Reduce this group via a VANCOUVER TAX and house prices would be stable or fall also.
The limited increase in Auckland rentals underlines the key component that the Auckland property market is a speculation driven bubble. I rented there for a couple of years and the rentals were cheaper than Wellington for a small apartment. The limited growth in the apartment rentals however does surprises me, as much of the population inflow is students who seek inner city shoe-box apartments.
There will be a point where capital gains will ease; 'investors' will get tired of a weekly subsidy of the rental and sell the property - resulting in a decline in property values.
The point that gets missed by those who claim the increases will go on for ever is that there is a maximum that all workers (factory or professional) can pay in auckland and therefore prices cant keep going up forever.
sorry to disappoint you ex socialist, but prices won't stop increasing. with interest rates so low, and going lower, affordability is still very reasonable - people can service much bigger mortgages. a halving in interest rates from here will double the size of mortgage people can service on an interest only basis. ignore repayments of principal, won't be a problem - either go interest only, or push terms out to 50 years or more. that will happen next. prices will keep going up until interest rates turn, which they won't for decades. hope you're not sitting on the sidelines waiting for a correction.
Harrian,
Your assumptions could be described as either heroic,or nuts. Even if the OCR was to fall by 50% from here and that is unlikely, mortgage rates would fall only marginally. Taking out an interest only mortgage is to my mind, akin to taking a small boat out in a storm without a lifejacket or radio. In other words, highly risky, just like your prediction that interest rates will not turn higher for 'decades'.
I wish you luck and I am only sorry that I don't have a grotesquely overpriced Auckland property to sell you.
Anecdata (which I usually hate), but during an apartment search a month or so back I was told by multiple property managers that the market is very quiet for central city rentals at the moment. Some had shaved 20% off previous asking prices. I do worry that, in this climate and with the Unitary Plan provisions, we will be looking at a future apartment glut.
Perhaps this article should apply to them as well http://www.interest.co.nz/business/83671/report-ethics-financial-servic…
My rent in Mount Maunganui hasn't changed in more than a year, but it's already $400 a week for a 2 bedroom fully furnished unit 200m from the beach.
Plenty of houses being built at the moment, especially in the Papamoa area, so I'd expect to see soon a drop in asking rents.
Kiwimm even better send in foresigb students and foreign temp workers to buy and this govt and the media wont even call them foreign buyers....
What a joke....
Canada they are labelled foreign buyers
Australia labels them foreign buyers
Singapore labels them foreign buyers
Little wee nz doesnt .. thanks NZ media... perhaps they also need an ethics class
Christchurch rents are flat at the moment due to many new landlords with one property they rent.
They don't rely on the income too much and with interest rates at low levels not a major.
Will say though that there are many people with a rental property or two that really shouldn't have them as they
really aren't terribly professional and often under rent their properties.
Returns of 6 per cent plus are very easily achieved in Christchurch and with money at 4 per cent and there is increasing prices then it is a no brainer!
Or more likely supply exceeds demand. Christchurch will suffer from a variant of Dutch disease. Since earthquakes, there will have been a reduction in organic industry growth in non-construction related industries, due to high cost of commercial property rents and wages. So effectively for the last 5 years entrepreneurs who may have potentially started a new business, such as non-construction related manufacturing will have started up in a different locale. This will have flow on effects with sub-optimal economic growth in Christchurch as construction activity winds down. This will be reflected in property prices and rents, going forward. The fact that Christchurch property prices and rents are turning down in the face of the lowest interest rates in 50 yrs and record immigration numbers does not bode well.
It bodes just fine, it means that residential properties are exactly that, somewhere to live. They are not a financial vehicle, driven and held for speculation of capital gain. As a result ordinary people will be able to access a home without having to shell out the margin demanded by the speculators. Sounds like a nice place to live.
Utterly agree, it is way past time this sickness of treating housing as a casino that always paid out stops, and houses return to what they were intended for in the first place. Go find yourself a proper investment or run yourself a proper business, because depriving people of homes, and patting your backs for providing "shelter" has no credibility anymore and about time, too.
According to TradeMe there are some 1975 houses for rent in Christchurch - I've noticed that this number has been increasing over the last few months (last week there were over 2000 rentals listed). The simple question I ask is why - are some of these . accidental landlords , have others snapped up "bargains" only to find that there is no one to rent the property. I walked past a house today in Riccarton with a for rent sign suggesting it was suitable for students in 2017 ( eh?). The whole rental market in Christchurch doesn't make sense at the moment.
This is exactly the reason why a DTI introduction by the RBNZ would take 40-50 percent value off the Auckland housing market , given that it is property investors that are taking on the highest DTI mortgages . By removing them ,there would be no perceived housing shortage and first home buyers would after the fallout be able to purchase a home, and in Aucklands case the social fabric could return to a semblance of normality, not driven by two decades of vested property trivia. What a truly sad place Auckland is.
Yes indeed, a DTI is needed urgently to be applied to residential property "investors".
A rental yield of 5% represents a VTI of 20. If a DTI limit of 5 is applied to "investors", then the effective LTV (= LVR) then applying would be 25% (= 5/20) compared with the LVR limit of 60% that will apply from Oct 1st. A DTI of 5 is high compared with what is applying in the UK and Ireland, but provided it is applied to "investors" buying existing homes it will be helpful for FHBs who would then have a level playing field to compete on.
2015 figures for New Zealand , not Auckland , 28 percent of 'investors' DTI over 7, FHB make up just 3 percent. The reality in Auckland would be significantly worse given that house prices are significantly higher and incomes are similar. The notion that FHB would be the ones left behind as reason not to introduce DTI put out by all those speculating and all those trusted vested interests are going to be sadly mistaken
2015 figures for New Zealand , not Auckland , 28 percent of 'investors' DTI over 7, FHB make up just 3 percent. The reality in Auckland would be significantly worse given that house prices are significantly higher and incomes are similar. The notion that FHB would be the ones left behind as reason not to introduce DTI put out by all those speculating and all those trusted vested interests are going to be sadly mistaken
As mortgage rates fall, investors are content with the rents they are getting.
A drop of two percent on a $600K mortgage is equivalent to a rent rise of $230 per week.
This is what as been happening over the past 12-18 months.
Not a bad little earner if you can get it.
Were stuck in a negative feedback loop. Low interest -> high asset prices -> more rent extraction -> less disposable income -> poor economic performance -> lower interest rates.
Imagine if that trend ever reversed…
Higher interest rates -> (yields follow) lower asset prices -> lower rents -> more disposable income -> inflation -> higher interest rates.
I conclude that the national party and the top 0.1% absolutely love poor people because they keep inflation down.
So if rents are flat and not increasing , what does that tell us about the underlying "shortage' of housing ?
In a property functioning market , if rents went up dramatically it would lead to more entrants into the market , chasing yield ( often called super-rents) , which would stimulate demand from investors for more houses, and the market would supply the new houses to get back into equilibrium (over time )
Maybe we are completely misreading the demand / supply dynamic at play here
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