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  • Are residential rents dropping?

    Contrary to logic, according to this article, rents may be dropping.
    If this trend continues the question is whether there are too many rentals on the market?
    Or is it because so many people are leaving for overseas?
    Or maybe the cost of petrol is draining peoples wallets and they are simply unable to pay?
    Or is it merely a statistical wobble?


    Drop in rental prices unexpected - expert
    Monday, 23 June 2008

    The median rent level has dipped $5 a week to $295, according to a quarterly report on the residential rental market.

    The record high reached for rents at the start of the year was $300 a week, Massey University's Real Estate Analysis Unit said.

    The unit's director, Prof Bob Hargreaves, said the 1.6 per cent drop was somewhat unexpected because rents had been rising steadily last year and during the first months of this year.

    However, on an annual basis, rents were still 5.36 per cent higher than in May last year.

    Prof Hargreaves noted commentators believed a significant number of would-be vendors had taken their houses off the market and chosen to rent them out instead.

    The 50 per cent fall in the number of houses sold compared to 2007 was reinforcing renting as the better option, he said.

    "As house prices decline, renting may be a more attractive option for some households than buying. However, in the medium term, history shows buying is normally the most attractive option, particularly when the period of ownership is over five years."

    Wellington was doing better than Auckland on the apartment front, with a median weekly rent for three-bedroom apartments at $600, compared with $435 in Auckland, possibly because of areas of oversupply there.

    The median rent between the two cities was $288 per week in Wellington and $280 in Auckland.
    OllyN [email protected]
    Independent Property Consultant
    Residential and Commercial Solutions

  • #2
    that is interesting...

    thanks for highlighting this olly

    my two cents...

    a preponderance of lower rental cost properties being taken up as fuel dollar causes compromise to rental budgets?

    cheers

    Comment


    • #3
      no surprise

      The only reason this is a surprise to Hargreaves is because it goes against his wildly illogical assumption that house rents will rise to moderate the grossly misaligned income to rent ratios. And he just cant help himself from saying it's still a good idea to buy now for the medium term. What a guy.

      p.s. shifted houses in Mt Eden area recently rent from $550/week down to $480/week, plus better school, full section, etc.

      Comment


      • #4
        Originally posted by HappyRenter
        p.s. shifted houses in Mt Eden area recently rent from $550/week down to $480/week, plus better school, full section, etc.
        Ahhh, I always wondered why you were happy, renter. Now I know.

        You can save that $70 per week until you have enough for a house deposit. Then you'll be on your way.

        Paul.

        Comment


        • #5
          Plus as house prices drop, he will be getting the benefit of that each week as well.
          So he will be a "double" happyrenter

          Comment


          • #6
            My landlord tried putting the rent up $20 p/w. We said we would be leaving in 3 weeks.

            The rent is no longer going up.

            Comment


            • #7
              Are Residential Rents Dropping

              Hi
              No personal experience of rents dropping as yet, but it's early days. This being my fourth "bust" as a residential landlord, falling rents have always followed on from dropping house prices, so I have factored this into my budget, and in my case, am prepared for an income drop of approx. $300-400 p.w. based on the number of rentals owned at the moment. I distinctly remember the last time, and the inducements offered to applicants to persuade them to sign up! It's just the usual cycle.

              What I've learned: Indicate to tenants early on, that if they're thinking of finding somewhere else, to contact you first. I'm quite open with tenants and say that rents in the marketplace can go up, down or sideways. I just follow the market, so I really want to know if they're making plans. In 1998, admittedly with more flats, I had 25 change-overs in one year! Each time the tenant phoned to say they had found somewhere cheaper, I offered to match the rent, but it was too late, they had already signed up! Maybe very different factors were operating in those days, but I prefer not to take the chance and did some cashing up last October-November.

              My experience is that renters on the whole have quite flexible circumstances, and will switch to doubling up with friends, going home to parents for a while, etc. etc. quite readily if times get tough. And that's sensible. Now, I don't know if times are tough enough yet, or whether they will be, but in just the same way that when yiou take out a mortgage, you have budgeted for an interest rate increase or two, so you should budget for the next 2 years or so that rents may shrink Go with the flow. It's better to have someone in your flat at a lower rent, than holding out for more. Look after your tenants and do maintenance promptly. My totally amateur forecast is that for a couple of years we won't see rent rises, we won't see property values rise. Even for oldies like me with a certain amount of equity, times will be tough. Good tenants may be thin on the ground, the phone doesn't ring, hardly anyone shows up at your open homes, you go back into your empty flat and think "now what can I do to make it attractive and highly rentable?!" So... you just have to work a bit harder!
              Cheers

              Comment


              • #8
                What period were the statistics from?

                It is common for rents to jump up at the beginning of the year due to increased demand from:
                • People returning from holidays
                • People starting their studies
                • People starting new jobs/contracts


                As the year progresses and demand slows, rents will ease. Look for the next big jump in rents during Jan/Feb '09.

                Comment


                • #9
                  This says it all!

                  Originally posted by Contrail View Post
                  My landlord tried putting the rent up $20 p/w. We said we would be leaving in 3 weeks.

                  The rent is no longer going up.
                  The expectation Of many I have read is rents will go up. But what is worse some rent money coming in or no rent money coming in? I suspect tennants are in a far stronger position than landlords who owe their souls to the bank. As a result it may well be that rents don't increase................but if that is the case then property prices must come down...........OUCH!
                  The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.

                  Comment


                  • #10
                    Many homes are now being withdrawn from the market as the vendors ars not willing to accept the lower prices on offer.
                    Many of these homes are going into the rental pool.
                    This is putting pressure on rents in some areas.

                    Comment


                    • #11
                      Flat property market means more landlords

                      8:00AM Tuesday June 24, 2008


                      To rent or to buy? That is the question.

                      A significant number of would-be vendors have taken their houses off the market and chosen to rent them out instead, a study of rental property shows.

                      "The 50 per cent fall in the number of houses sold compared to 2007 was reinforcing renting as the better option," said Professor Bob Hargreaves of Massey University's Real Estate Analysis Unit.

                      Somewhat surprisingly, latest research shows the the median rent level has dipped $5 a week to $295.

                      The record high reached for rents at the start of the year was $300 a week.

                      Prof Hargreaves said the 1.6 per cent drop was somewhat unexpected because rents had been rising steadily last year and during the first months of this year.

                      However, on an annual basis, rents were still 5.36 per cent higher than in May last year.

                      "As house prices decline, renting may be a more attractive option for some households than buying. However, in the longer term, history shows buying is normally the most attractive option, particularly when the period of ownership is over five years."

                      Read the rest of the article here.
                      Patience is a virtue.

                      Comment


                      • #12
                        Originally posted by Realtorman View Post
                        Many homes are now being withdrawn from the market as the vendors ars not willing to accept the lower prices on offer.
                        Many of these homes are going into the rental pool.
                        This is putting pressure on rents in some areas.
                        So where are the vendors living if they are tenanting their homes?
                        Jo Birch
                        Looking for someone to manage your next project or event? Then call now!
                        +61 450 148 678

                        Comment


                        • #13
                          Originally posted by Heg View Post
                          So where are the vendors living if they are tenanting their homes?
                          I know of one couple who over committed to buy a rental. They ended up renting out their own home as well and renting themselves, it was a case of just being able to afford to own but not being able to afford to live in it them selves!
                          The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.

                          Comment


                          • #14
                            We recently put rents up $60 (15% increase) on one of our properties when changing tenants. 0 days vacant between tenants.

                            Comment


                            • #15
                              I sent out increase letters about 4 weeks ago to my North Shore tenants. Between a $7 and $10 pw increase on 4 properties since they moved in 6 months ago. No complaints so far.
                              My Manurewa rentals go up in July by $15 per week and again, no one has given us notice to quit. I think it is because we are still charging fair rent and our properties are very well maintained.
                              Jo Birch
                              Looking for someone to manage your next project or event? Then call now!
                              +61 450 148 678

                              Comment

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