Rent rising in Auckland

Auckland rentals are rising, while house sales in the city in January continued the pattern from the last quarter of 2010, firm Barfoot & Thompson says.

It noted that while house sales turnover was low key, the rental market was active.

Barfoot & Thompson managing director Peter Thompson said the 810 properties the firm let in January were 3.3 percent more than a year earlier but supply was still short.

The $416 average weekly rental last month was $5 more than in December and $15 higher than a year earlier.

"The lift in rents started in July last year, and January's average has set a new benchmark," Mr Thompson said.

"A shortage of properties to let combined with landlords looking to improve their operational returns on their investments is behind the rent increases."

Goldman Sachs economist Philip Borkin said a possible reason for the rise in rents was that landlords were trying to recoup the impact of tax changes which reduced returns from investing in residential property.

Another factor was demographic pressures as a result of low new building activity and modest levels of net migration.

The Barfoot & Thompson figures also showed the average Auckland house price in January was up 2.1 percent from a year earlier to $515,693, which was 2.6 percent down on the 2010 average of $529,648.

The company sold 563 properties in January, compared to 583 a year earlier, and up 39 on December's sales.

A lack of new listings was a major factor in sales volumes remaining modest, Mr Thompson said.

New listings fell to 896 last month, a quarter lower than in January last year, although better than December's 737, which was the lowest in a month for more than a decade.

"It is a lack of sellers that is holding back market activity. What buyers are lacking is choice," Mr Thompson said.

ASB economist Chris Tennent-Brown said that on a seasonally adjusted basis the turnover in January was down 3 percent from December and new listings were down 0.6 percent.

Seasonally adjusted the average rents dropped 1.1 percent, but remained at "very high" levels, Mr Tennent-Brown said.

The property market remained weak, with turnover low relative to the amount of listings on the market.

Housing fundamentals remained unsupportive, with migration low and affordability stretched, and while mortgage rates were low, they were significantly higher than in early-2009 and were expected to rise slowly in the years ahead.