Auckland rents are rising at more than double the rate of inflation.
Auckland rents are rising at more than double the rate of inflation, tenant numbers are up and there are 44 tenants available for every place, says the city's largest rental property manager.
Barfoot & Thompson, which got a massive 107,268 tenant inquiries between January and March, said demand was particularly high and outlined how the sector was under pressure.
Releasing this year's first-quarter activity, Barfoot said average rents rose 4.6 per cent; rents for new tenancies rose 7 per cent; vacancy rates were low; and the number of online registrations to view properties was at record highs.
Rents are far outstripping inflation. The Reserve Bank's consumer price index is running at 2.2 per cent and Statistics NZ says annual wage inflation, measured by the labour cost index, held steady at 1.6 per cent in the March quarter.
Kiri Barfoot, a Barfoot director, yesterday told Herald Focus there were an average 44 prospective tenants for every property, with further interest on the company's online booking system.
"We introduced online booking for rental property viewings in 2015. Tenants are able to enquire about a property anytime and questions can be responded to around the clock.
"It has streamlined the entire process for renting by opening up communication, giving automatic reminders for viewings, and providing an easy link for people to apply for a property with no paper forms required.
"The system has also given us data on rental property demand. On average around 20 people register online to view a property, but we've seen incredibly high demand in some instances. A record 105 people registered online to view a single rental property in Epsom recently, which was unprecedented", she said.
"Over the past 12 months, North Shore three-bed rentals had an average weekly rental price of $611, 3 per cent higher than the average greater Auckland three-bed rental of $596.
"Two-bed rentals on the North Shore were also 3 per cent higher with an average rental price of $484, compared to $470 for greater Auckland," Crockers said its latest market research, released this month.
More than half the landlord surveyed by Crockers plan to increase rents in the next six months, compared to 57 per cent in September last year.
Barfoot & Thompson said the vacancy rates in its 14,000-plus rental properties remained at 1 to 2 per cent, meaning properties were empty for only around five days between tenants. This has been the case for more than a year, she said.
By April 20 in Auckland City (central and eastern suburbs), 204 residential properties were available via her agency.
Most central suburbs had three or fewer properties for rent. On the North Shore, there are 67 properties, in Waitakere 70 and in Manukau 119.
Yet TradeMe rental properties today showed much higher numbers.
Barfoot was the city's largest private property management business and the number of residences it managed had grown at 9 per cent year-on-year, "so it's not a matter of fewer listings; rather there are simply not enough rental properties to go around," Kiri Barfoot said.
Average rents across all property types and locations was $531/week, up from $508 this time a year ago.
Average rent rose more in south Auckland (6.4 per cent), and slightly less in central Auckland (2.8 per cent) Franklin/Manukau (3.2 per cent) and Pakuranga/Howick (3.4 per cent).
Average weekly rents for new tenancies rose 7 per cent to $571/week in the first quarter up from $533/week a year ago. In comparison, in 2016 the rise was 6.1 per cent (fourth quarter), 2.4 per cent (third quarter) and 4.6 per cent (second quarter), Barfoot's data showed.
"There are fluctuations in rent for new tenancies, however, rent for new tenancies is rising. Landlords are having to face the reality of needing cash flow to maintain and improve their property, cover increasing insurance and rates, and to prepare for increasing interest and compliance costs", Barfoot said.
"Landlords typically own one, maybe two properties. Residential property is a conservative investment and landlords don't like increasing rent. They prefer a trustworthy long-term tenant who pays the rent on time and looks after the property. When a property is vacated, this is a far better time to balance costs versus incoming rent," she said.
Rent for one- and two-bedroom properties are leading the increases.
The largest rent increases were for one- and two-bedroom homes for the past two quarters.
"For Q1 2017, one bedroom properties averaged $348 per week (up 5.5 per cent from $330 in Q1 2016), and two bedrooms $437 (up 5.1 per cent from $421). A three-bedroom home averaged $531, rising less than 1 per cent on last quarter ($525) and 4.3 per cent on the same quarter in 2016 ($509), while four-bedroom homes brought in $666 (up 3.8 per cent from $641) and five-plus bedroom homes averaged $826 (up 3.7 per cent from $796)," Barfoot said.
David Whitburn, a former Auckland lawyer-turned-investor and developer, was not surprised rents were rising which he attributed to strong demand.
"With the LVR [loan-to-value ratio] restrictions making it harder to own a home, this in particular hurts first home buyers. I am aware from tradespeople on the many projects under construction right now that rents are going up and it is difficult to find quality properties.
"Relatives sold their home and haven't found one to move into yet and really struggled with a pet cat to find a suitable tenancy, so they have some run-down, cold Kohimarama three-bedroom at pricey levels of $850/week.
"I am told by Harcourts on the North Shore that tenancies routinely get placed on the first day and many organised tenants have CVs prepared with professional cover letters to secure their tenancies.
"My last tenancies were both filled within a day with a myriad of enquiries in popular Ranui, West Auckland, which is strongly benefiting from all the employment and amenities of Westgate's continued expansion and growth and great commercial developments in Henderson and Lincoln," Whitburn said.
"I remain deeply concerned that first home owners have far too high a barrier to entry. With Auckland's lower quartile house price hovering around $700,000 it takes $140,000 as 20 per cent for that deposit, with a few exceptions.
"This is out of reach for far too many young Kiwis. I feel the Government should use their strong balance sheet to offer a low-interest loan to first-home citizens and secondary home owners with special circumstances, something like 3 per cent interest rate capitalised into say a 15-year loan. They could come with a second mortgage or caveat against dealings to secure the Government's position.
"Home ownership encourages stronger sense of community and belonging, and I would call on the Government to assist keeping the dreams of tens of thousands of younger Kiwis alive," Whitburn said.
