Tenants can expect rent hikes of 5%

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Landlords seek to meet rising costs including rates and mortgage payments

Landlords are warning tenants to expect rent increases of 4-5 per cent as rising interest rates start to bite.

It comes as new figures reveal the average cost of renting a three-bedroom Auckland home has jumped by $23, while a Mt Eden three-bedroom property will cost you $59 more.

But a tenants advocacy group says landlords would be "foolish" to hike rents any further and risk losing good tenants. Experts say the market will dictate whether renters are prepared to pay more.

Ministry of Business Innovation and Employment figures show Auckland house values jumped 11.6 per cent to $720,426, while average rents grew by 3.6 per cent to $456 a week in the year to July. In Wellington and Christchurch the situation was reversed, with rents posting bigger percentage gains than house values.

Property Investors' Federation executive officer Andrew King said landlords faced rising costs, including council rates, water charges and insurance. Most had taken those extra costs "on the chin", while mortgage interest rates had remained low.

However, with the Reserve Bank hiking interest rates by a percentage point in recent months, "I think [landlords] will be looking to recoup a lot of those costs," Mr King said. "Undoubtedly rents will be rising but it doesn't necessarily mean they're going to rise at the same rate as the housing market."

Mr King predicted rents would jump by 4-5 per cent - around $20 a week on average. He expected the charges to start taking effect through spring.

A recent Crockers survey of landlords found half were not planning to hike rents in the next six months, but more than one-third planned to put them up by at least 3 per cent.

Crockers figures show rents for three-bedroom homes have surged in some Auckland suburbs, jumping 10 per cent in Mt Eden to $632, 9 per cent in the city centre to $684 and 8 per cent in Birkenhead to $551.