30% rise in rents tipped

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Reported on National Radio (or Radio New Zealand National as it has been awkwardly rebranded!)

Westpac Bank is forecasting rents to increase by as much as 30% over the next five years.

Annual growth in rental prices is currently around 3%, but Westpac economists pick that will double within a year, and stay at 6% for five years.

Westpac economist Dominick Stephens says subdued capital gains, high mortgage rates and low rental yields are a "classic formula for higher prices.

He says the good news is that average disposal household income is expected to increase by about 5% over the same period.

The headline on the radio was optimistically "Why are rents going up, and when will they come down".

Andrew King's response was 'Never' and an assertion that incomes are rising faster than rents (not that I've noticed )

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[SuperDad]

Yippee!

Paul.

[flyernzl]

I would say + 50%, to get some relativity between rental levels and costs back (provided that there is a flat house price market).

[PC]

Finding a tenant seems a bit slow at the moment.
Have all the workers left for Aus?

[Re@der]

How are you looking PC?
ie trade me, other internet sites, newspaper ads, notice in the super market, on the noticeboard of institutions where a lot of flatting people hang out.

[sheree99]

rental increases?

I've found many tenants, particularly in the lower income groups who are also being hit by other rising costs and a stalling economy are looking to pay less rent rather than more. They are wanting to achieve this by either having more people living in the property or just renting a lower quality place. Even those on the higher wages are not looking to spend all their income on rent as many are only looking to rent while here on business while transfering etc.and may still be servicing a mortgage eslewhere Even the larger companies and govt agencies who rent residential proprties for their contract workers are now lowering the amount that can be spent on rent as the companies/ govt depts tighten their belts in the face of a slowing economy.
Rents will be always be dictated by supply and demand. As the ecomony tightens the demand will be for lower rents rather than higher ones. It will take the number of rental properties out in the market place to fall significantly before the demand pushes the prices up significantly.
But then again Westpac has a point With rising mortages and a flattening (or even falling) of property prices maybe they are predicting that many of these fly by night investors and ones hoping to get rich quick in the property market are all going to be selling in the next couple of yrs so the available rental properties will be greatly reduced.

[Perry]

Westpac economist Dominick Stephens says
the good news is that average disposal household
income is expected to increase by about 5%
over the same period.

I hope his maths are better than his language skills seem.

[Perry]

I tend to agree with Sheree99. Supply and demand will
be the dominant issue. The Oz exodus will be a factor
of significance.

Rumours are that many hundreds of Islanders are being
flown in to HB for the picking season. All are temporary
and have their return flights booked and paid for, but . . .
I wonder where they'll put 'em all?

PC - we've had a modern, nice 2 b/r cottage empty for
8 weeks! The no-smoker ban was a small part of the
problem. Lots of lookers, but some chequered experiences
with takers. (Before anyone asks: $230/wk)

[PC]

Recently renovated 2brm unit in Torbay, Northshore.
$320pw. Was expecting $340pw.
Property manager has been advertising for 3 weeks.
On about 5 websites + local rag.

Have started advertising myself.
May try it at $295pw - beats $0!

[PC]

Think I've worked out what my problem is!
(Other than I'm a capitalist trying to over charge poor hardworking tenants!)

It's the new half spanish white paint job; boring!
Bring back the bright orange 70s kitchen.
Had no problem renting it then.

[srv]

The last few tenants I've had through have tried to negotiate the rent down from the listed price...

What's up with that haha.

[Re@der]

Thats normal isn't it SRV?
I take it that you asked them if they still wanted to be considered as tenants at the rent asked for?

[srv]

Thats normal isn't it SRV?
I take it that you asked them if they still wanted to be considered as tenants at the rent asked for?

First time it's happened to me. Must of been because they were the only ones viewing at the time.

haha yea pretty much

[xris]

It happens to me sometimes and I usually end it there and then by saying no.

Later I might reflect and lower the rent for the next ad if still not let.

But there is a risk in negotiating the rent down like this.

1/ If they like the place the rent should usually be their secondary consideration so they are just trying it on with you.

2/ You're the boss so act like it and stand your ground.

3/ If they genuinely cannot afford that extra $10 or $20 then do you really want them as tenants?

xris

[Andrew]

I think Westpac are right, in general, however there will be areas in New Zealand that will see falling rents through a lack of demand or an oversupply of rental property. Auckland inner city rents have stabilised, but they have had a negative effect on rental prices in surrounding areas.

Tenants will always try and pay the lowest rent they can for a property and some will always ask for a discount. Unfortunately this is a low demand time of the year for renting so a discount may be appropriate to secure a tenant. You can always put it up in six months.

Over the last few years the gap between the cost of owning a home and renting a home has increased quite dramatically. This is one reason for the number of house sales falling over the last year or so. Aspirant first home buyers are changing their minds and choosing to rent. While saving for a deposit they were willing to live in poorer living conditions to save on rental payments (Move in with parents, Couples go flatting instead of living by themselves etc). This was fine in the short term, but now they want better living standards and this should lead to increased demand for rental property.

The cost of providing rental property has also increased which adds to the justification for rent increases.

We let a property last week for an extra $20pw. It was taken in less than 24 hours from the previous tenant giving notice. I must admit I was surprised given the time of year.

Keep an eye on rental levels as you may be surprised.