Auckland landlords hurt despite rents hitting seven-year high

The return on rents is still well out of line with property values in Auckland.

The return on rents is still well out of line with property values in Auckland.

Renters can breathe a little easier after rents have eased back from a seven-year high in November.

Nationally weekly rents rose to $362 in December, up 5.2 per cent over the year, but slightly lower than a 5.5 per cent spike in November.

The November hikes were even stronger in Auckland, where they hit a 12-year high of 6.8 per cent.

But with house prices rising so quickly, the rent increases are far from enough to make many Auckland rental properties pay their way.

According to Infometrics, which crunches the bond data collated by the government, rental yields are at record lows in almost all parts of the city, leaving landlords with little in the hand after costs.

Chief forecaster Gareth Kiernan said: "You would be struggling to find a rental property in Auckland that was generally positive for cashflow". 

In old Auckland city, for instance, rental yields had dropped as low as 1.95 per cent, rising to 2.35 per cent in Waitakere.

Such figures were well past the previous low set in September 2007, when old Auckland was averaging a rental yield of 2.58 per cent and Waitakere was around 3.87 per cent.

From an investors' point of view, investing in Auckland's rental market had been justified because of its capital gain, Kiernan said.

"I don't know how strong that justification will be going forward," although it was possible that Auckland's fundamental housing shortage might just see the market bounce back in a few months.

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Outside Auckland, landlords were doing better, with national gross yields hovering around 3.73 per cent.

Excluding Auckland and Canterbury, rental increases were at an eight-year annual high of 6.6 per cent last month.

Some of the biggest increases were in Whangarei (9.8 per cent), the Waikato region (6.2 per cent) , Tauranga (11 per cent), all at multi-year highs.

At the other end of the spectrum were the West Coast and Christchurch, where rents were at 16-year lows, down 6.7 per cent and 4.9 per cent respectively.

For Auckland landlords, however, there was some light on the horizon.

Kiernan predicted that the Reserve Bank's mortgage restrictions would curtail some property investment and the resulting shortage of supply would drive rents higher.

Outside Auckland, moderate economic growth in the regions was likely to keep the pressure on rents this year.

"The pressures outside Auckland are not as pronounced but from what we have seen in terms of house prices and sales data, there's a modest pick-up which potentially could translate into rents," he said.

 - Stuff


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