Average Auckland three-bedroom house rents have surged beyond the $600/week threshold for the first time.
The latest rental data for the first quarter to March shows rents up 3.3 per cent annually to the record $603/week.
And there could be more to come, forecasts one management chief.
Kiri Barfoot, a director of Barfoot & Thompson which manages around 16,500 Auckland residential rental properties, released new figures.
The same three-bedroom property cost $597/week in the final quarter of 2019, the management business said.
Barfoot said the latest data did not capture much of the changes the Government ushered in with the February 11 law amendment and the March 23 announcement that landlords would be banned from claiming tax deductions on mortgage interest payments for investment properties.
"The expectations for the coming months are less clear as the market navigates through these changes," she said.
No significant shifts are expected due to the bright line test being extended from five to 10 years but limiting deductions on interest expenses would ultimately put further pressure on property owners' operational costs, Barfoot said.
"The relatively measured pace of change across the market as a whole over the past two years, which has sat well under the previous trend of 3 to 5 per cent rises year-on-year, indicates many landlords are taking a long-term approach to recouping rising costs.
"However, we may well see unintended consequences on rents and stock as landlords grapple with the practical reality of incorporating these latest regulatory changes into their balance sheet," Barfoot said.
Auckland rent rises were "relatively measured, rising only 3 to 5 per cent annually. That indicated many landlords were taking a longer-term view", she said.
Rents on properties with five or more bedrooms remained relatively static, up less than 1 per cent or $8/week annually.
Rodney rents rose the fastest, up 4.3 per cent or $25/week, "likely mirroring the same upward pressure being seen in the local residential sales market", Barfoot said.
Central Auckland - dominated by apartments - had the city's only rental fall, down 2.3 per cent annually.
"Central city apartment averages continued to experience the brunt of the impact from
the pandemic, with reductions most notable in the weekly rent cost of two and three-bedroom apartments compared to March 2020," Barfoot said.
On May 4, the Herald reported how the number of new Auckland residential bonds lodged with the state service for rental properties plummeted 30 per cent in February this year compared to last February, official statistics show.
Bonds lodged is the best new tenancy indication but what would have usually been the busiest month of the year became a four-year slump.
The reasons for the change are not yet clear and nor is it clear if that pattern will continue.
Landlords take bonds when a new tenancy is struck, lodging it with the state's Tenancy Services in case of unpaid rent, property damage or any claims.
Bond lodgements are the best indication of the number of new properties being rented and the service gathers information monthly for each territorial authority and posts it online, although unlike house sales data from the likes of the Real Estate Institute, it receives little publicity.
Tenancy Services data showed that in February 2018, 5613 bonds were lodged for Auckland properties followed by 5586 in February 2019 and 5856 in 2020.
But in February this year, only 4083 bonds were lodged for newly rented Auckland properties, down 30 per cent on last February.
Experts in the sector put forward four theories:
• Did tenants stay put and fewer move to new places thus skewing the data so severely down?
• Did landlords sell places, as they have loudly threatened, and tenants get less choice, barring them from the number of properties they usually would in the high season of February?
• Did shut borders and Covid's toll, particularly on the tertiary international student market, drive the numbers so low?
• Is it a statistical anomaly, adjusted when the next month's data is published, due to bond lodgements for February being late which is often the case with the Tenancy Services data set?
A Ministry of Housing and Urban Development spokesman said the way the data was collected had changed and the February number could be adjusted up.
"Due to a new way of collecting the data by MBIE the data published for recent months is incomplete and will be revised in subsequent releases," he said.
A reasonable proportion of tenancies which started in February would not appear in the published data yet.
"For that reason we'd advise against trying to do year on year comparisons for the most recent months using the bond data. We have not seen any evidence of landlords exiting the market, indeed the latest CoreLogic buyer classification data suggests investors were still actively purchasing during this period," he said.