The average weekly residential rent in Auckland has risen by 4.7% in the last year, from $520 to $542/week for a 3-bedroom home, according to Barfoot & Thompson’s third quarter figures.
Director Kiri Barfoot, who oversees the company’s property management division, didn’t put a figure on how much landlords’ costs had risen, but did list several: “We are just coming out of winter, which is a maintenance-heavy period for rental properties. Add to that uncertainty around rates increases, increased insurance costs due to the fire service levy and the incoming Earthquake Commission levy, compliance costs for smoke alarms & insulation, and you can understand the context of rent increases.
“Many owners will be relieved at recent forecasts indicating that interest rates are likely to remain flat in the near future.”
She said the biggest average rent rise was in the central suburbs, up 6.2% in a year from $550 to $584/week.
“Demand for rentals in Ponsonby, Grey Lynn, Mt Eden, all the old Auckland City suburbs west of the Southern Motorway, is strong. The area boasts short commutes into the city, and the properties often have outdoor space, parking, and are close to shopping, dining & entertainment areas. At the same time, fewer new properties are being built because of high land costs when compared with other areas where denser residential developments can be constructed, or where land costs are lower.”
Ms Barfoot drew a distinction between movements in house prices & rents: “I wouldn’t expect rent to flatten out as house prices in Auckland have. Just as Auckland rents didn’t increase at double-digit rates along with house prices last year, or the year before.”
Would-be home buyers pushing up one-bedroom rent prices
In a comparison of the number of bedrooms, Ms Barfoot said the biggest suburban increase had been for one-bedroom homes, up 6% from $339 to $359. In the central suburbs, the average rise for one-bedroom rentals was 9%, from $339 to $370/week.
“Almost 60% of renters plan to buy a home in the next 2-5 years, but we know that saving for a 20% deposit and tough lending restrictions are delaying people from buying. In the meantime, people are taking an interim step – choosing to rent on their own in between flatting and the traditional first-home buying stage. They are prepared to pay a little bit more for privacy, and are fortunate to have plenty of new developments to choose from.
“In Auckland Central, where a large number of apartments have become available in the past couple of years, rent for one-bedroom properties has increased at the same rate as the city-wide average, showing that the demand is there. Many of these new apartments have been in the higher end and will appeal to people moving on from a flatting situation, but who are yet to buy a place of their own.”
Attribution: Agency release.