Header Ad Module

Collapse

Announcement

Collapse
No announcement yet.

Expect rent rise, tenants warned

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Expect rent rise, tenants warned

    Expect rent rise, tenants warned
    5:00AM Saturday December 08, 2007
    By Anne Gibson

    Aucklanders could be in for a major rent shock, as landlords prepare to impose big price hikes to meet rising costs.

    Property investors are vowing to push rents up to keep pace with crippling mortgage interest rates and say those who have not already increased their rents are about to.

    Auctions held outside properties - a phenomenon earlier this decade which saw tenants bidding fiercely against each other - could even make a comeback, as landlords find crowds turning up to view places.

    Rents have already risen in many Auckland suburbs, as well as in Wellington and Christchurch.

    With about a quarter of the country's 1.4 million houses, flats and apartments rented, much is at stake for 1.2 million tenants who are a growing group due to historically high house prices and steep mortgage interest rates, forcing more people to ponder renting for life.

    Landlords collectively control a $162 billion pool of private rental stock and they have backed a major Westpac report released this week which predicted rents would rise nationally by a third in the next five years.

    Andrew King, an Auckland landlord and vice-president of the New Zealand Property Investors' Federation, said rents were already rising throughout the city and investors were preparing for a big tertiary student influx early next year.

    He cited a double-whammy of more tenants but fewer rental properties, saying tenant numbers were ballooning as people resigned themselves to long-term renting, but fewer investors were buying because houses were too expensive.

    "Landlords have had to wait to get tenants before but now there's much stronger demand for properties. The auctions on the lawns could possibly come back because there's lots of people turning up at the same time and competing to rent properties again," Mr King said.

    "Wages are rising, employment is strong, the economy is strong, big Fonterra payments and net migration increases are all driving this."

    Most tenants accepted that rent rises were inevitable, he said.

    The Weekend Herald took Department of Building and Housing rental data and compared it with the levels rents could reach by 2012.

    By 2012, residents of Parnell and Newmarket could be paying an average $926 a week for a standard three-bedroom house. The city could soon have entire suburbs where larger houses rent for more than $1000 a week. For example, a four-bedroom house in Parnell/Newmarket rents today at $767 but using Westpac's predictions would be $1022 in five years.

    Westpac said landlords would no longer tolerate the extremely low returns on properties which had cost them a fortune to buy.

    Rents had been subdued for most of this decade, up just 2.2 per cent a year during the past four years. But the bank reckons they could rise 6 per cent annually for the next five years, partly driven by strong wage growth meaning people could afford higher rents. The numbers no longer added up for landlords and they would not tolerate getting a 4 per cent yield on a property when mortgage interest rates were well above 9 per cent, meaning they had to tip substantial amounts of cash into the property to simply maintain ownership, the bank found.

    Stagnating house prices would usually be a signal of an economic slowdown, cooling the market. But the bank said the levelling off in house prices had come at the same time as a strong world economy and while New Zealand was enjoying a dairy price boom, more government spending and tax cut prospects.

    Helen Gatonyi, Christchurch co-ordinator of the Tenants Protection Association, predicted dire consequences from any rent rises.

    "More people will start living in boarding houses, couch surfing or staying with friends," she said, saying poor families, young people and struggling singles would suffer most.

    "People who are teetering on the brink of poverty and feeling depressed or desperate will slip further. More people will be homeless."

    Some tenants were so desperate that they were striking fixed-term deals for next year now, she said.

    Charles Waldergrave, a social policy researcher, said the Government's accommodation supplement was the most effective measure to help those worst off. But housing costs were the single biggest expense.

    "You have to pay for your electricity and your rent so food becomes a discretionary item."

    About 250,000 households receive the accommodation supplement from the Department of Work and Income which targets low income earners and beneficiaries.

    On Thursday, Auckland agency Barfoot & Thompson, which manages more then 7000 houses and units, said average weekly rents had fallen from this year's high of $388 in October to $377 last month. Peter Thompson, director of Barfoots, said the latest drop was only minimal and rents had risen from $360 in January. Students were leaving Auckland so prices might drop temporarily to keep tenants over Christmas.

    http://www.nzherald.co.nz/section/3/...0481117&pnum=0
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    It will be interesting to see how the rental market reacts to price increases. With some people moving from their low interest rates of between 6-7% from a few years ago to current rates of between 9-10% I cannot imagine that renters will be very accepting of having to absorb the full increased interest cost of their landlords...

    Comment


    • #3
      Will just increase the exodus to Australia.
      "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

      Comment


      • #4
        What interests me about the above article, is how the Herald believes that an across the board rental hike can actually occur. Private rental property is not Public property. No property owner can be made to rent his property for x amount of dollars -- just because everyone else is doing it.

        It is a free market. Therefore, those who will not be affected by rising interest rates and sliding home values -- can choose to rent their properties for whatever price they like. Those who need to raise their rents will do so. The important thing is that tenants will have more available rental options, and a wider range of choices.

        In Olly's book, the "The Day The Bubble Bursts", he gave an example where he actually lowered rents when everyone else was raising them. So, it could happen again. There are investors out there who will flourish as everyone else flounders.

        The only Doom and Gloom I see here, is that over the last five years, too many New Zealanders, who don’t know what they’re doing, got in over their heads. If raising rents is the only thing they’ve got, it won’t save them. Who, on this web-board remembers interest rates over 15%?

        This is the Chinese Gooseberry/Deer Farm/Winery all over again.
        Last edited by exnzpat; 08-12-2007, 05:55 PM.
        Erewhon is still erehwon, I don’t see it changing anytime soon.

        http://exnzpat.blogspot.com/

        Comment


        • #5
          I agree that tenants are no way obliged to pay more rent just because landlords have higher expenses. Like any commodity, the price of rental property (= rent) is dictated by supply and demand for the commodity. By my thinking, rents will rise, because fewer non-professional investors are buying, some investors are selling to take the caital gains they have experienced, while demand will remain static at worst, and increase at best (from the investor's perspective) because housing is still very expensive to get into. Therefore, unless the economy hits the wall, migration goes backwards (which can't happen in the med/long term because of the drastic need for more workers as baby-boomers retire), or some similar shock, I see no alternative than rents rising because of the imbalance in supply and demand...

          Anyone else out there see the world in the same way???

          Comment


          • #6
            Originally posted by exnzpat View Post
            If raising rents is the only thing they’ve got, it won’t save them. Who, on this web-board remembers interest rates over 15%?


            There are some here who can remember wishing for interest rates to be so cheap.
            www.3888444.co.nz
            Facebook Page

            Comment


            • #7
              Originally posted by Adman
              I agree that tenants are no way obliged to pay more rent just because landlords have higher expenses. Like any commodity, the price of rental property (= rent) is dictated by supply and demand for the commodity.
              I agree - its the number of rentals versus the number of tenants that dictates the rents.

              Originally posted by herald
              [Andrew King] cited a double-whammy of more tenants but fewer rental properties, saying tenant numbers were ballooning as people resigned themselves to long-term renting, but fewer investors were buying because houses were too expensive.
              I'm not so sure about this - the number or rentals is dictated by the number of investors already in the market, not the number entering the market now.

              Having said that, the rental figures in NZ Property Magazine have been upward for my neck of the woods (West Akl) for a while now.

              cube
              DFTBA

              Comment


              • #8
                The Real Problem

                As expenses for investors rise it is natural for the pressure to the passed onto the tenants.

                The trouble with this theory that in practice the tenants resist and have the huge weight of public opinion (not to mention the law) on their side.

                That is why I virtually gave up residential property and concentrated on commercial instead.

                When you chuck a solo mum and 5 kids into the street the media and the tenancy laws will make a meal out of it, even if they richly deserved chucking out in the first place.

                On the other hand, chuck out a dress shop, a gay bar, or panel beater and no one is interested.

                That suits me fine.
                OllyN [email protected]
                Independent Property Consultant
                Residential and Commercial Solutions

                Comment


                • #9
                  When you chuck a solo mum and 5 kids into the street the media and the tenancy laws will make a meal out of it, even if they richly deserved chucking out in the first place.

                  On the other hand, chuck out a dress shop, a gay bar, or panel beater and no one is interested.

                  That is why I virtually gave up residential property and concentrated on commercial instead.
                  Now there's a quote for the start of Property Climbers
                  DFTBA

                  Comment

                  Working...
                  X