Rent: Tenants feel the pinch

Maree Tassell says rising rents should be no surprise. Photo / Doug Sherring

Forty per cent of landlords have increased their rents in the past six months, and many by up to 10 per cent, a survey shows.

The survey, run by Landlords.co.nz and Mike Pero Mortgages, found 26.2 per cent of the 614 investors surveyed who had increased their rent had done so by 6-10 per cent.

Another 42.5 per cent of those who had increased rents had done so by up to 5 per cent.

Sixty per cent had increased rents in the past year.

The rent increases come as no surprise to Tenants Protection Association spokeswoman Helen Gatonyi, who said her office had received many complaints from tenants.

"Even at the low end of the market, a 10 per cent increase on $300 rent is $30," she said.

"For a family or someone on a low income that could be the breaking point."

Shaun Riley, chief executive of Mike Pero Mortgages, said: "There is a shortage of rental stock and rising prices are putting some people out of the purchase market."

He said a supply-and-demand equation was pushing up rents. A shortage of housing stock was prompting competition for rentals, which in turn made rents rise.

And as houses became more valuable, as was the trend in Auckland and Christchurch, rents would also rise. "When assets have more value, investors want better returns."

But Riley was surprised that only 55 per cent of the investors surveyed expected rents to continue rising.

Gatonyi said in Christchurch, tenants were encountering increases of more than 10 per cent as landlords struggled with extra costs, such as more expensive insurance. "People really are suffering."

Maree Tassell, a buyer's agent and property investor, said landlords were looking for cashflow-positive properties, with rent high enough to cover all the outgoings.

She had noticed an increase in rents in Central Auckland, in particular.

A house owned by her partner in Orakei had its rent raised by the property manager from $450 to $550 over a couple of years. The manager of one of her properties in Rotorua had put the rent up from $270 to $290 a week.

But rising rents do not appear to be affecting the ability of landlords to find tenants. Most surveyed had not had vacancies of more than a week.

Landlords.co.nz publisher Philip Macalister said the survey reinforced his ideas about what was happening: "If you're not getting capital gains, you push up rents - you are looking for income."

He said extra costs, such as more expensive insurance and the Government move to reduce the amount of depreciation that could be claimed on rental properties, contributed to rent rises.

He said rents would continue to rise until there was no longer a housing shortage. "People always need somewhere to live. There's a huge imperative to start building more houses."

Macalister said property investors were often portrayed as bullish or gung-ho, but his survey had shown they were running their businesses well, using low interest rates to pay down debt, for example.

He said property investment was one of the few areas that was offering a good return. "If you put your money in the bank you're not going anywhere after inflation and tax. People are pretty wary of shares, and there are not a lot of fixed-interest options around."

He said he expected more people to buy investment properties. "The biggest issue is finding property to buy."

As Auckland purchase options dwindled, he expected investors to look at other centres. Riley said that was already happening, particularly in Hamilton.