Alanah Eriksen

Alanah Eriksen is the New Zealand Herald's property reporter, and assistant chief reporter.

Rents rise as buyers forced out of market

Photo / File
Photo / File

House rental prices in Auckland could rise by up to 50 per cent in some areas because new mortgage lending restrictions are pushing would-be home owners into the rental market.

Market observers say rents for three-bedroom properties in suburbs near transport links and schools could be expected to rise the most.

One commentator says he has already started to see "slum-like conditions" in rental properties as desperate tenants crowd into homes to split the costs.

Read: Reserve Bank Governor Graeme Wheeler explains the home lending limits.

The latest Auckland rental figures, for the six months to September 30, just before the Reserve Bank's loan-to-value ratio changes came in, show a 3 per cent increase in the weekly price for three-bedroom homes on the same period last year.

All but four of the city's 30 suburbs - covering the area from Orewa to Pukekohe - had risen, according to property management company Crockers.

Some renters were paying up to $50 a week more.

The area that encompasses Ponsonby, St Mary's Bay and Herne Bay remained the most expensive place to rent at $766 a week - an increase of 6 per cent.

At the other end of the market, Pukekohe was the cheapest place to rent at $359 a week, but had still increased by 3 per cent.

Property investor and author Olly Newland said rents in some areas could go up by between 20 and 50 per cent over the next 12 to 18 months.

It would mainly affect Auckland suburbs that were handy to schools, close to transport links and had at least three rooms so tenants could share the high rents.

"People will be staying in their rental homes a bit longer than they were and there'll be more competition for good rental properties," Mr Newland said.

It made rental properties extremely attractive to investors who would either return to the market after pulling out during the global financial crisis, or simply expand their portfolio.

Some landlords were capitalising on the desperate market by renting out homes on a room-by-room basis.

"It's not a good look," Mr Newland said. "We don't want to go the way of Bangladesh. It's quite rife. We come across it all the time, especially in the lower socio-economic areas.

"We don't want to become a nation of slum-dwellers in the main cities.

"I get rent and I'm happy to collect it but I'm certainly not interested in becoming a slum landlord."

Some tenants were cramming in other occupants without telling their landlords.

"A lot of clients have rented a three-bedroom house to a couple and when they turn up a week or a month later, there's 20 people in there," Mr Newland said.

Chrissy Houlahan, of Rentmenow Property Management, also expected to see a 50 per cent rise because of the restrictions, and because investors were paying premium prices for homes in a heightened market.

She said she was fed up with the process and was walking away from overpriced properties.

"I say to landlords 'You can't expect tenants to pay your mortgage just because you've paid way above what you should have paid'. It's so frustrating for me to see what's happening.

"There's just nothing around for people and they're forced into paying ridiculous prices. They don't have a choice or they end up on the street. You're going to have more and more people living in garages.

"There are certain types of investors out there and they're the ones that are really trying to screw every little cent out of the market."

She'd seen landlords add bedrooms to tiny units to try and fit more tenants in.

One two-bedroom unit she was trying to rent in Mt Wellington had been converted into three bedrooms. The landlord was asking for $420, but she said it should be priced at about $350.

- NZ Herald

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