Landlords are quitting Rotorua's rental market as changes to renting regulations make investment properties less appealing.

The decision to sell comes at time rent prices are predicted to rise.

Since 1998, the average Rotorua rent has increased 71.6 per cent, from $158.30 in 1998 to $335.10 in 2018, according to figures from CoreLogic.

However, the latest Trade Me Rental Price Index says the median rent outside New Zealand's three main cities rose 10.5 per cent last year to an all-time high of $420 a week in August.

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Colin Elstob from Inspire Property Management said it was currently tough being either a renter, a landlord or a property manager.

"If the proposed changes are implemented, landlords will need to stump up with a decent amount of money to install a heat pump or a flued gas fire or heater [woodburners are not an option in Rotorua] and that's a few rents gone," Elstob said.

"Then there's insulation, another few weeks, and if they use a service requiring a letting fee, there's another week's rent gone."

He said tenants faced different issues.

"It is tough getting a rental in Rotorua and some homes are costly. Throw a large power bill from a heat pump on top, something has to give and often that's rent. That then opens a whole different box."

He said he did not think the proposed changes should be applied across the board, especially in the regions.

"I haven't seen landlords running to sell but there are definitely discussions taking place. I think it will be more the mum and dad investors who bought a property in Rotorua with the intention of perhaps coming back to live one day that will potentially sell, not investors with a large portfolio."

He said some landlords may take advantage of a buoyant market.

"I had one landlord who bought a place five years ago for $129,000 [three bed, double garage, immaculate] who didn't increase the rent from $280 during that time because he was so happy with his tenants. When they [tenants] decided to buy, the landlord decided to sell and got $339,000."

He said the rental market would get tougher for everyone and landlords' margins would tighten.

Rotorua Rentals co-director Richard Evans said supply and demand was dictating the rental price in Rotorua.

"I have at least five to six families willing to pay between $500 and $600 a week for a tidy home," Evans said.

"This includes senior management staff who are moving to the area."

He said having to tell people they had missed out on a home was tough.

"When you have five families interested in one property, that's four you have to let down. And there's nothing wrong with these people – they're not smokers, they're able to pay the rent – it's just someone else is more suitable."

He said the market had the potential to become tougher.

"I've got a friend who owns three rental homes in Rotorua, all valued at over $600,000. He bought them to provide for his retirement and also to provide a service.

"But they have decided to sell all three as new and potential regulations are making it tough. They're sick of being beaten by the Government."

He said that was additional to the large number of former rental homes now marketed as Airbnbs.

"That has also taken a number of rental properties out of the pool.

"Because availability is driving the cost of Rotorua rentals, things could get worse."

He said a two-bed, two-bath home that had been tenanted in January at $380 a week, was currently available again but at $410 a week.

Steve Lovegrove, Professionals McDowell co-owner, said it was interesting to note about 35 per cent of rental properties in New Zealand were looked after by a property manager as opposed to 55 per cent in Australia.

"So there's a lot of mum and dad landlords trying really hard to maintain a relationship with their tenant," Lovegrove said.

"When the Healthy Homes NZ regulation comes into force next year, and if the proposed changes are made, they're going to be spending a lot of time and energy ensuring compliance."

He said landlords who could not afford to make their properties compliant could very well end up selling.

"There is a lot of uncertainty in the market."