Hot Auckland Rental Market

[Meehole]

Haha. Yes please. I'll rent it at that price!

Is it a full moon?

Quite often we see articles about the cost to buy/own your own home vs the cost to rent. The articles don't compare the chap who has paid off his mortgage with the renter and neither should we. The cost of holding a property will obviously be worked out based on the cost to service a loan based on current market value plus other outgoings.

Now you tell me why rents increase over time. You can't say it's because of demand. Even in places where supply and demand is at equilibrium rents increase over time.

Well we have 2 properties in Whangarei, one brand new in 2008 and the other completely renovated since 2008. The rent on the brand new one has been $400 week for all that time. The rent on the older one has risen from $320 to $340 week in that time. In the beginning when the mortgage rate was 9.75% (during the recession and GFC) we topped the rent up. It didn't matter that they cost more than other houses in the street as we had spent more renoing them and building them, the rent was what someone was prepared to pay.
Currently I am finding that there aren't many people who want to rent out some of the houses I have on the books for $900 - $1100 week. In January when demand was high and it was summer you could easily get that and more.

[donthatetheplayer]

Are you arguing that rental prices do not increase over time?

[Meehole]

Are you arguing that rental prices do not increase over time?

I'm not arguing, I am merely offering up examples and scenarios of how things are, I have asked you to give an example or examples. How long have you been investing and what is your experience based on the properties you have personally been involved with?
The 2 examples I gave you are factual, so yes I am saying that in this instance since 2008 a property has remained at the same rent, the other has gone up $20 week. Learn from that.

[Wayne]

Now you tell me why rents increase over time. You can't say it's because of demand. Even in places where supply and demand is at equilibrium rents increase over time.

Rents increase over time due to costs - true.
It's called inflation.
But to say 'if you make me pay more interest I'll have to put up the rent' is not true.
Over the past couple of years the costs of owning a rental in Auckland have gone up considerably - if you buy it now.
The rents haven't kept pace with the price inflation and returns have dropped considerably.
Rents are only now starting to rise due to the supply issue.

Your on a hiding to nothing here - give it up.

[flyernzl]

Quite often we see articles about the cost to buy/own your own home vs the cost to rent.

Invariablly we see/are quoted some new home owner who is saying "My mortgage costs are no more than what I was previously paying in rent".

Of course, he is in for one hell of a shock when the bills that were previously included in that rent for rates, insurance and maintenance start rolling in.

Few tenants actually realize just how expensive it is to own a property, excluding financing costs. In Auckland, even for a modest home, its getting up near $100 per week.

[Wayne]

True that .

[donthatetheplayer]

To say it's just Demand is not to see the wood for the trees guys. I don't have much time to discuss today so here's a good post from another forum that provides food for thought:

Top 10 reasons for increases in rent, in order as i see them...:

1/ Rising house prices: rent eventually catches up, either by rising themselves, or by property prices faling, although the latter is rare. People want to live in an area, but cant afford due to rising prices, so they rent instead, so increased rental demand.

2/ Inflation: Wage increases are often a minimum of inflation, so higher inflation means higher wages, means greater rental affordability. Inflation also causes house prices to increase generally....exception being when it causes LARGE interest rate rises which may have opposite effect.

3/ Infrastructure: Although change in infrastructure less prevalent so wont occur as often as others, its impact is often more evident. Example, a new university = increased student accomodation demand etc.

4/ Interest Rates: Interest rates, not taking into account point 2 above, can cause rents t increase by making 'housing purchases' less attractive. In times of high interest rates, 9%+ is my benchmark, most people (but not us hardened investors) tend to put ff buying a house and decide to either rent or continue to rent. Having said that, IR can often have the opposite effect depending on the reason they are high. Generally though, higher interest rates mean higher rents.

5/ Demographic trend: Was debating whether to put this higher, probably should be. If population growth into a suburb is higher, then generally, rental growth is higher. This however depends on the type of person moving into an area. If its renters, then ok, if its people wishing to owner occupy then rents could stagnate, although the reductin in investment property could also increase rental growth indirectly.

6/ Trendy areas: self explanatory. Current buzz is coastal, cafes, private schools. These cause a natural increase in rental rates.

7/ Development: newer, better, more modern houses will cause an noticeable increase in rent. This will drag up the rent rates of established homes as well.

8/ Tough restrictions in 'heritage' areas: The impostition of tough development restrictions in certain areas can cause house price growth which results in renta increases (see point 1). This depends on the area though. For example, carlton in Vic with its old terrace living has tough development restrictions, which means the area maintains character and price growth. Check out carlton rental yield growth.

9/ Government support: Changes to centrelink, and other govt support (eg tax breaks) for renters can increase the attractiveness to rent. Eg rental rebate increases, or increase in eligibility.

10/ Good investment performance (non-property): If renters have good investment performacne in their portflio, they are more likely to accept landlords request for rent rises. Thic could have a notable impact on rent rates.

I have not mentioned supply and demand because i think that is really a cause and effect of the above points, not a cause in its own right.

http://somersoft.com/forums/archive/index.php/t-8052.html

Cheers, Don

[Meehole]

Mate don't have time to read the cut and paste. No 9 - centrelink applies to Australia not NZ, you're dreaming! No 3 infrastructure - new university - a new one of those hasn't been built since Massey in Albany and that was 2 - 3 decades ago and I am not aware that another new one is tabled to be built.
Come on give your own reasons based on your own experience as to why rents will rise based on the owners costs/expenses, otherwise let the topic go.

[PTILoveYou]

Come on give your own reasons based on your own experience as to why rents will rise based on the owners costs/expenses, otherwise let the topic go.

Immigrants will need houses to rent and live in.

Rents will go up.

[Wayne]

Immigrants will need houses to rent and live in.

Rents will go up.

That's a supply and demand thing - not an increased costs thing.

[PTILoveYou]

That's a supply and demand thing - not an increased costs thing.

Well if demand drops, but cost of owning a rental increases, landlords actually still need to drop rent...

[Wayne]

Well if demand drops, but cost of owning a rental increases, landlords actually still need to drop rent...

Yes - that's what I have been banging on about!
Supply and demand rather than cost of supply.

[soundslegit]

It's hard to know Wayne. Theoretically increased build cost should sort of drive up rents but in Auckland right now it is demand pure and simple.
Talking demand, look at those poor Lemmings sleeping in their cars to buy Ti Toki the other day. The developer doesn't even own the land yet. That could really end in tears. Sleeping in your car to spend 450K off plans with no guarantee of title. Of course they weren't told that the seller doesn't own it yet. Terrible.

[Wayne]

It's hard to know Wayne. Theoretically increased build cost should sort of drive up rents but in Auckland right now it is demand pure and simple.

Really? Increase house prices doesn't.
Property prices went up lots for quite some time before rents finally moved

Talking demand, look at those poor Lemmings sleeping in their cars to buy Ti Toki the other day. The developer doesn't even own the land yet. That could really end in tears. Sleeping in your car to spend 450K off plans with no guarantee of title. Of course they weren't told that the seller doesn't own it yet. Terrible.

I didn't know that - selling something you don't own - isn't that illegal?

[sidinz]

no - I have always said kaka de toro but google didn't accept that (maybe spelling is wrong).
Certainly that is what it was when I was in Sth America.

caca - very few Spanish words contain 'k' and those that do were borrowed from other languages.