6 per cent rent rise mooted

[muppet]

6 per cent rent rise mooted
New 5:30AM Tuesday December 04, 2007

Rents could rise 6 per cent a year, creating a new source of inflation, Westpac economists say.

The bank also said the softening housing market would reduce inflationary pressures but the dairy boom would outweigh the impact of the slowing housing market boosting spending and inflation.

Westpac said rents had been subdued for years rising at an average rate of just 2.2 per cent a year over the past four years. It expected rents would accelerate rapidly by 6 per cent per annum and would stay that high for five years, creating inflationary pressure.

One of the reasons for this was increased demand for rental housing. "High interest rates will reduce supply," it noted.

http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10480096

[muppet]

Rents to rise as housing boom dies
By JAMES WEIR - The Dominion Post | Tuesday, 04 December 2007

Rents are expected to rise 6 per cent a year for the next five years, but high interest rates have killed the house price boom after a five-year run, Westpac says.

Rents would need to rise 34 per cent to bring them in line with house prices in terms of landlords' returns, and that process could take five years, Westpac says.

With an end to spectacular capital gains, landlords will no longer be happy to get a paltry 4 per cent yield on a property when mortgage interest rates are above 9 per cent.

"The numbers just do not stack up for landlords," Westpac says in its latest report on housing.

Annual house price rises will hit zero by the middle of next year, which will be a shock after double-digit growth for the past five years.

Rents have been subdued for years, rising at just 2.2 per cent a year in the past four years, but Westpac expected them to rise to 6 per cent a year and stay high.

Good news is that wages are expected to rise about 5 per cent a year.

Average rents equal about 24 per cent of the average wage, from 28 per cent a decade ago.

In the next few years fewer landlords would want to build new properties and expand the stock of rental properties.

Demand would rise, with rents equal to 4 per cent of a home value compared with 9 per cent to borrow and buy a home.

Rents would also be driven up by high interest rates and strong wage growth, creating a new inflation problem for the Reserve Bank, Westpac says.

The central bank is expected to keep the official cash rate at 8.25 per cent in this week's Monetary Policy Statement, but Westpac believes it will raise interest rates twice next year - and it is likely to foreshadow that on Thursday.

Stagnating house prices would normally be a sign of an economic slowdown, cooling inflation and lower interest rates.

But the slowdown has come at the same time as the strongest world economy for three decades.

The impact would be swamped by the inflationary effects of the dairy price boom, greater government spending and the potential for tax cuts, a strong job market and the strong Australian economy.

Meanwhile, it will be difficult or impossible for home owners to borrow more as house prices cool.

The wealth effect means that as the value of homes rises, people feel richer and so spend more.

That could either be by borrowing more or buying smaller homes and having more cash to spend.

Westpac estimated that $9 billion of this "equity" had been taken out of the housing market in the past two years. In the next two years that would be down to about $5 billion - which is equal to about 2 per cent of all private spending.

The reduction would hit some retailers hard, especially those selling big-ticket goods.

The drop would be small, however, compared with the dairy industry's expected $7.2 billion windfall from high global prices.

The Government would also get more tax from that dairy income.

http://www.stuff.co.nz/4310768a10.html

[muppet]

Has your rent gone up?
4:30PM Tuesday December 04, 2007

Westpac says rents have been subdued for years, rising at an average rate of just 2.2 per cent a year over the past four years. It expects rents to accelerate rapidly by 6 per cent per annum and will stay that high for five years, creating inflationary pressure.

Has your rent gone up? Here is the latest selection of Your Views:

prometheus hoonican (Hamilton)
Rents are comming down not going up. Look on trade me at houses available for rent and how long they are sitting vacant. Www.Moneyfiles.org check out this site and don't believe those who are trying to talk up the market, real estate agents are bending over backwards for tenants. Remember all thoose boomers are starting to retire now and are/will be trying to cash out. Death waits for no one not even boomers. And as for the bank economist's opinions, do you really think they will tell you the truth. They want you to borrow money off the bank, it's in their intrests to tell lies to make you believe that house prices only go up and the economy is rosy, so you better borrow some more money and get further into debt so they can make more fees. Japan 1990-2007 seventeen years of house prices going down. Www.moneyfiles.org

adam Snell
The property market is over valued. Rents especially inner city apartments are expected to fall.

Kristen Baker
I woud love to know what the writer means by the "Capital gains cap" we have in place?

Rick Glen
It is truely remarkable how confusing the editors of the Herald are. Well, I prefer to think that they're confused rather that believe that they are deliberatly misleading the public. To report the words of a Westpac economist that rising rent prices will create a new source of inflation is about as true to reality as reporting a mugger saying that headaches are a source of blows to the head. Isn't it about time that the Herald started doing some research into the activities and purpose of the central banks and their cronies at the reserve bank and start being morally honest to the public?

LOL (Auckland)
I have to laugh out loud about this one. Property investors for years have been investing in properties valued several times above what normal people can afford, being purchased by people in search of tax free capital gains. All this article shows is what people have been saying for years, the fundamentals of this invesment just do not stack up without capital gains. Property investors are going to lose their money. Wait for the crash!

Wish I could buy (Auckland)
My rent hasn't gone up, but I have been in the same flat for three years, I am a good tenant who always pays the rent and water bill on time, looks after the property and gardens, and doesn't complain to the landlord or make problems for the neighbours. My rent is almost half my nett salary, and as a single mother with high expectations of behaviour I do not wish to save money by sharing accommodation with other adults who may not set a good example for my daughter. I am unhappy with the quote in your article that rents need to rise by 34 per cent to bring them back into line with current house prices. The problem is that house prices are out of line with wages. In the mid seventies my father's salary was $3,000 and my parents purchased a decent (but not flash) house on a large section for just over three times his salary ($10,000). Tripling my above-average full time salary doesn't even buy me a studio apartment in the poorest suburbs of Auckland.

WG (Pt Chev)
Just sold our house and we're going to rent for a while. Rental rates are still a far better deal than paying 10% on a big mortgage.

http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10480193&pnum=0

[srv]

Hows the comments... Bet they rent, if only you could find out who their landlord is and send them the article haha