Cost of living: Record rental property prices - Auckland landlord surprised by how low the increase is

Residential rents reached record levels in the last two months, up to $595/week in January and $600/week in February - but an Auckland landlord who owns 12 properties says he’s surprised the rises were so meagre.

Gavin Lloyd, Trade Me Property sales director, said last month that rents had href="https://www.nzherald.co.nz/business/rents-rise-4pc-annually-to-hit-record-high-of-595week/V4FWUE3MCVFLZEK5B3FVOTJCOU/" target="_blank">set a new record but today he announced that had already been eclipsed.

Peter Lewis, Property Investors Federation vice-president, who owns 12 Auckland homes, said: “I’m stunned it’s so little. Inflation is now 7.2 per cent, food prices are rising more than double that but rents are only up 4 per cent annually which is really good for tenants because it’s only about half the inflation rate.”

Rents would keep rising due to current inflationary times, he forecast, and landlords are trying to cope with extra costs including rates, insurance and maintenance.

Lewis owns one New Windsor property without a mortgage which he said needed 25 per cent of the last two years of rent on ownership costs “without any major maintenance”, expressing empathy with tenants.

“We want to have satisfied customers - tenants are our customers. Most tenants are fairly accepting of the fact rents will rise. Tenants are probably better off than homeowners who are suffering big cost rises with interest rates rising.”

Lewis had increased rents on all his places 5 to 6 per cent in the last year and rotated the rises through the year.

But he said in many places, you can’t increase rents to cover costs “because you can’t out-price the market”.

Asked how much he received in weekly rent, he said: “Let’s just say it’s enough for me to live a comfortable old age.”

Around 1.3 million New Zealanders rent, often because they cannot afford New Zealand’s crippling house prices which are some of the highest in the world compared to incomes.

Stats NZ today said that in the year to last June, one in four households renting spent more than 40 per cent of their disposable income on housing, compared to one in five households that were paying a mortgage.

Rents continued to increase at a faster rate than mortgage payments, it said.

During the last 15 years, average weekly rent payments rose 93 per cent, compared with mortgage payments, up 48.8 per cent.

Average weekly rents for the June 2022 year were $410.90, compared with $475.40 for average weekly mortgage payments.

The latest Trade Me figures mark a 4 per cent annual jump, or $25 per week since last February, still well below the rate of inflation at just over 7 per cent.

Lloyd said rent rises in mid-summer were not unusual but he acknowledged the continual rises put people under pressure.

“Typically we see rent growth accelerate over the summer months and this year is no exception. This is a result of heightened seasonal demand paired with a large number of tenancies coming to an end during this period. These properties are then put back on the market, often with an adjusted rent,” he said.

With the rising cost of living on everyone’s minds, that will be tough news for tenants who will be having to dig deeper to pay, he said.

National median rent stayed around $500 per week from April 2019 where it remained for the rest of the year.

By 2020, rents were around $515 per week before increasing to $520 by December that year.

Yet 2021 saw the largest increase in four years, climbing $20 per week between January and December.

Last year, rents began at $570 per week and finished the year at $580 per week.

Claims emerged this week that changes to rental laws to make properties warm and dry have driven up rents, which are now at record highs, according to a government-commissioned survey.

The survey, commissioned by the Ministry of Housing and Urban Development, found a quarter of landlords put up rents in the six months before May 2022, and one of the most popular reasons for this was increased costs lumped on by the Government.

Minister for Housing and Urban Development Dr Megan Woods. Photo / NZME

Housing Minister Megan Woods said the survey reflected “the advice I have that there is not enough evidence to suggest regulatory changes are the main cause for rent increases”.

But National said this week the survey provided evidence about what it has been saying regarding the law changes since they were originally legislated in Labour’s first term.

Lewis called for the Government to reverse landlords being unable to claim tax deductions on expenses.

The Trade Me data is based on activity by property managers and private landlords.

Wellington remains New Zealand’s most expensive place to rent with a median of $695 per week.

Auckland rents hit a new high in February of $620 per week. Christchurch’s rents were $510 per week in January and February.

Nelson-Tasman had the biggest annual rent rise, up 10 per cent to $550 per week, the Trade Me data showed.

Lloyd said the impacts of recent flooding and Cyclone Gabrielle were not yet clear in February data.

“What we do know is that prices in the Auckland and Hawke’s Bay regions have been on the incline for some time and this continued last month.

“Unfortunately, more rent increases are likely as supply in these regions is stretched even further due to flooding damage,” he forecast.