The cost of renting a house in Tauranga is rising, putting pressure on tenants as landlords pass on increasing overheads.
Some landlords in the Western Bay have already started raising rent, which is expected to jump by up to $30 a week for an average home in the next year.
The "triple whammy" of a GST increase, loss of depreciation tax breaks and rising interest rates would inevitably see rent rises for tenants, said Shayne Donovan-Grammer of QV Valuations in Tauranga.
Tauranga areas expected to be hardest hit by rent increases are Brookfield, Bellevue, Otumoetai, Matua and Pillans Point, all suburbs popular with renters.
But unheated and unrenovated homes in less-desirable suburbs are unlikely to see significant increases.
Tauranga Property Investors Association president Dan Keller said while some landlords had already put rents up in small increments, he expected others to follow suit at the end of the year.
"In property management, if you never increase your rent, you are losing out bigtime and actually subsidising the tenant.
"I would expect rentals to increase significantly towards the end of the year when it starts to warm up. Going into winter is not the best time to increase rent."
Mr Keller said landlords usually tried to put rents up in between tenants. He expected rises of up to $20 a week, even on $200-a-week properties.
Next year is expected to be tough for landlords, as the GST increase kicks in on October 1, and depreciation tax breaks are lost from April 1. Interest rates are expected to continue to rise.
Landlords would compensate by either raising rents, or selling their property and investing their money elsewhere, Mr Keller said.
That could create a shortage of rental properties, which would also create a rise in rent.
"We'll see rents rising. In the end it's supply and demand. Tenants will start sharing houses again, or staying in smaller houses and not upscaling."
Mr Keller said he had heard of tenants moving house after the landlord raised the rent by as little as $5 a week. "Shifting is not cheap. In the end if the tenant has to move because it's $10, they are desperate."
Marjorie Spicer of Tauranga Budget Advisory Service said a rent increase of any amount was a problem for people on low incomes. "It is [a problem] when you haven't got any spare money. The thought of having to find extra money out of nothing ... it is a predicament."
Mr Donovan-Grammer said he expected to see rents rise significantly higher than over the last five years.
"Put it this way, rents aren't going to come down."
But rent increases would happen only if the demand for rental properties exceeded supply.
"If there's an oversupply of rentals, it's hard for landlords to push their rent up. It's pretty hard to put up rent if you can't rent it out.
"But if there's not enough supply, that could trigger a significant rise next year to compensate for depreciation.
"If the market can stomach it, they will have to incorporate it into rentals. That's the reality."
Mr Donovan-Grammer estimated a property currently renting for $270 a week could cost $30 extra by this time next year.
"That's $60 a fortnight, which is a lot of money if you are on a modest income."
Tauranga property manager Helen Barnard expected rents to rise only on desirable properties.
There was huge demand for tidy, well-heated houses renting from $340-$380 a week, she said.
"A really good three or four-bedroom house will always be easy to rent and they could put up with having a slight increase.
"Other properties are less desirable. If landlords have got a dunger and aren't prepared to invest in it, the market isn't as such that anyone will take anything desperately.
"Everyone says there's such a shortage of rentals but people are still very fussy. They want exactly what they want."
Rents tipped to rise up to $30 a week
AdvertisementAdvertise with NZME.