OCR rise likely to push rents higher

By Cassandra Mason

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Official figures show the average weekly rent in Hawke's Bay rose 2.6 per cent to $216 for the three months to April. Photo/File
Official figures show the average weekly rent in Hawke's Bay rose 2.6 per cent to $216 for the three months to April. Photo/File

Rents are on the rise in Hawke's Bay, the latest interest rates hike expected to push them even higher.

Data released from the Ministry of Business, Innovation and Employment (MBIE) shows the average weekly rent in Hawke's Bay rose 2.6 per cent to $216 for the three months to April, compared to the corresponding quarter last year.

The number of new bonds lodged in the region dropped 3 per cent to 1249 year-on-year, with a total of 14,481 active bonds as of April 30.

The Reserve Bank last week raised the official cash rate (OCR) to 3.25 per cent, putting more pressure on mortgageholders.

It was the third hike since March, the bank indicating more were on the way.

Simon Tremain, managing director of Tremain Real Estate in Hastings, said $216 a week was "quite light" for the region, as a standard three-bedroom home would go for about $300 a week.

Contrary to the figures, rents in the last year hadn't increased, he said.

"I don't think [rental] prices have moved. The sales market has been pretty static and I think the rental market's been in line with that."

Low interest rates had kept rent affordable, but the hike announced last week could change that.

"I think [the OCR rise] will have more of a push on rents.

"The reality is, once interest rates start moving people buying rental accommodation, they need a better return otherwise it doesn't stack up."

Nationally the average weekly rent increased 2.5 per cent to almost $265 in the three months to April compared to the corresponding period in 2013, while the number of new bonds lodged rose 1 per cent to 46,419, MBIE figures show.

As of April 30 this year, there were 450,113 active bonds nationwide.

Canterbury continued to have the highest rental growth in the country, jumping close to 13 per cent year-on-year.

Property Investors Federation president Andrew King said the federation's analysis of MBIE's data showed the median weekly rent had jumped 5.7 per cent nationally to $370 a week - markedly higher than the usual 3-4 per cent annual increase.

And the OCR hike could potentially see rents rise even further.

"If you've got people who are first-home buyers [rising interest rates] may put them off [buying] a little bit. And if it does, then they may decide to continue renting and save."

This would put pressure on the rental market, ultimately pushing up rents.

Rising interest rates would also increase mortgage costs for landlords, adding to the pressure, he said. "We would expect that over the next couple of years, there will be quite big increases in rental prices."

Proposals to impose "warrants of fitness" inspections on all rental properties would worsen the problem as property owners struggled to comply.

- Hawkes Bay Today

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