KEY POINTS:
Gone are the days when renters would put up with peeling paper, cracked windows and faded carpets.
There's a new type of tenant in town. They earn big incomes, like their home comforts and don't mind paying for the privilege.
"They are people who can't afford to buy their own home, or choose to rent for their own lifestyle, and might be earning $100,000," said New Zealand Property Investors Federation president Martin Evans.
Such tenants wanted "quality houses, tidy, with new carpets, and if it's a nice house, nicely decorated. They aren't too worried if it's $30 more [a week]".
That's one reason Auckland rents reached records levels in December.
A report by the Crockers Property Group, based on figures from the Real Estate Institute of New Zealand and the Department of Building and Housing, put average weekly rents at $438 for a three-bedroom home and $328 for a two-bedroom property.
The 2006 census recorded almost 300,000 rental properties in New Zealand, up from around 264,000 in 2001.
But rising rents don't necessarily mean bigger incomes for the country's many landlords.
An ANZ Property Investment Survey from last year showed investors owned more than five properties on average, but 47 per cent reported a negative net yield.
A further 48 per cent claimed they had been put off buying more properties in the next 12 months because the cost outstripped what the market allowed them to charge tenants.
Evans said many investors who had bought property over the past four years had been forced to subsidise rents because of high house prices and increased interest rates.
"People kept buying rental properties even while yields were down. The only way they can get returns now is to put their rents up."
Sue Tierney, a landlord and president of the Auckland Property Investors Association, said rents were "dirt cheap" in relation to property prices and some landlords were considering renting out their own home and becoming tenants themselves.
Her views were backed by figures from Massey University professor of property studies Bob Hargreaves, who said that in December, renting was typically less than half as expensive as owning a home. That will be cold comfort to Auckland renters.
The Crockers report said rents for three-bedroom homes in the City of Sails were about a third higher than the national average in December, and significantly higher than in any other major city.
Experts agreed that trend would continue because Auckland's larger population would maintain demand.
Experts are divided on the rent rises tenants could expect this year.
But Hargreaves didn't think they would leap by 10 per cent, as some landlords were predicting.
Migration, which usually fuels demand for rental accommodation, has "levelled off", forcing landlords to cap rent rises.
Late last year Westpac Bank economists tipped rises of 6 per cent a year for the next five years, a rate which would bring them back into line with house prices.
But property investor and Suburbwatch website director Kieran Trass said landlords would pay the price if they increased rents too much.
Trass said the average number of people per household began to increase in the middle of last year, meaning "the rent affordability issue must be starting to bite".
If tenants find rents too steep they would be forced to move into smaller properties or share with more people, creating more vacancies and halting rent rises.
"Landlords are puzzled at the moment," Hargreaves said. "They are all searching for the answer, that pot of gold at the end of the rainbow."
'Difficult' year for property investors
Renters might think landlords are sitting on pots of gold.
But with rent levels lagging behind rising property prices, some investors are happy to break even.
Auckland landlord Andrew Bruce, 37, and wife Cath Heppelthwaite own eight properties and say the past year has been "difficult".
Bruce, who does project management consultation as well as managing the couple's investments, and Heppelthwaite have bought one property in Hamilton, one in Rotorua, and six in Auckland in the past four years.
"We have found it quite difficult over the past year or so to find deals that would meet our criteria," Bruce said.
"We've been in a bit of a holding pattern... sitting on our hands a little bit, waiting to see what was actually going to play out in the market."
Bruce said trying to find properties with good yields had been very hard in recent months, particularly in Auckland, and shortfalls often had to be covered by landlords.
"To get something to break even, you have to buy it at a good price, and be able to add some value to it somewhere along the line.
"While people might feel rents are quite high, if you look at the other point of view, all the costs associated with owning houses are going up - rates, interest, insurance - they've all gone up in the past year quite significantly."
But even with rents at record levels in December, the couple said it had been surprisingly easy to find a large number of tenants eager to get into their Auckland homes.
"If you have well-presented properties, it seems there is the demand."
Bruce said they still felt confident about their investment in property, but investors had to be prepared to wait for returns.
"It can be a little bit of a sacrifice sometimes if you're in it for the long-haul."
