Demand for rental properties driving prices up

Rental prices are sky-rocketing in Northland.

A shortage of three bedroom rental properties in Northland is driving rent increases, a property expert says.

Trade Me's May property index showed the median price of a Northland rental property rose from $298 to $305 year-on-year.

The median weekly rent of one to two bedroom properties increased from $240 to $250, while three to four bedroom properties increased from $320 to $330. Rents for large properties with five or more bedrooms rose from $365 to $400.

LJ Hooker Whangarei chief executive Paul Beazley said there was a particular shortage of three bedroom homes to rent in the district.

"There's still a reasonable number of two bedroom properties," he said. "Tidy three bedrooms with a garage, particularly in the city, are in high demand. A three bedroom home that would normally be about $310-$320 a week is now about $340-$350."

Properties being taken out of the market had reduced supply.

"A lot of landlords have moved back into homes, particularly ones that have come back from off shore. There's also been a lot of investment properties that have been around for a while being sold.

"The housing market's got stronger so it's a good time for investors to get out [of the market]. [Former] rental properties are now owned by families and first home buyers."

He expected rents to gradually increase in coming months.

"I wouldn't be surprised if there's another rent increase next month, maybe not as much as $10, but it should continue to go up. Obviously they'll only rise to a point because tenants are limited by their incomes, but with such strong demand, gradual rises in rent are pretty likely."

Month-on-month, the national median weekly rent remained unchanged at $420, a record high first reached in January. This was a 6.3 per cent increase on May 2014, however.

Trade Me Property head Nigel Jeffries said it was the weakest month for median rent prices in 2015 - "but that's not to say it's cheap. It's also worth remembering that over the past five years the median weekly rent across New Zealand has risen 23 per cent from $340 to $420 and that's much, much faster than household inflation."