Rents about to break $500-a-week barrier

Migration to Hawke's Bay has contributed to higher rents for houses in the region. Photo / File

Auckland tenants could be in for a New Year shock: median rents could soon hit a new record high, breaking the $500 a week barrier.

Nigel Jeffries, Trade Me Property head, said the median Auckland rent would soon escalate.

That looked like a certainty, after it had hit a new high of $499/week in both August and September. However, it eased back slightly to $495/week in October, he said.

"This is still a rise of almost 8 per cent over the past year, adding $1820 a year to the annual cost of renting an Auckland property and we expect there will be further growth to come. I think we might see another significant jump early next year as many houses come on the market in the New Year and landlords reevaluate the market rent of their property," Jeffries said.

The median rent in Auckland tended to start each year with an early jump, then hover for a few months. Most of last year, it was static at $460/week, before jumping to $480/week in January.

Since May it has fluctuated between $490/week and $499/week.
Over the past five years the median rent in Auckland has risen by $105/week or $5460/year, an increase of 27 per cent.

Jeffries said that despite this very "it paled in comparison" to the 5-year trend around average house sale asking prices in the city which rose by $305,200 or almost 63 per cent over the same period.

Auckland renters are much better off financially than highly-geared house buyers because median annual rents are $25,441 compared to the much higher $38,057 annual mortgage interest costs.

Jeffries said the figures showed a huge difference between paying off an 80 per cent interest-only mortgage rather than the median weekly rent.

It was much cheaper to rent in Auckland rather than to pay off that mortgage, he said, although he also acknowledged people chose to buy rather than rent for many other reasons.

"Of course, there's so much more to weigh up in reality, such as interest rate changes, potential capital gains and all the other personal circumstances and psychological aspects involved in any property purchase," Jeffries said.

The premise of the calculation was the annual rental cost as compared to the 'sunk cost' of paying the interest only component of a 80 per cent mortgage based on the current floating mortgage rate.