Rent hikes hit hard in Auckland, Wellington

Rents in many parts of Auckland and Wellington have increased by more than three times the national average in the last year.

According to the Real Estate Institute of New Zealand, the national median rent charged for three-bedroom homes tenanted last month was $350 a week, compared with $340 in December 2010, an increase of 2.9 per cent.

But in major centres such as Auckland and Wellington, where demand for accommodation is greatest, the median rents in many suburbs increased by 10 per cent or more (see table). In the fashionable Auckland suburbs of Grey Lynn and Westmere, the median rent for a three-bedroom house increased from $580 to $660, a 14 per cent rise.

Properties in central Wellington suburbs also showed increases of about 10 per cent.

However, the lift in rents was not confined to the more affluent suburbs, with rents in traditionally affordable areas also showing big gains, such as Te Atatu in West Auckland, where the median rent for a three-bedroom home increased by $40 a week, an 11.4 per cent increase.

In other parts of the country, rent increases tended to be more modest, often increasing by $10 a week or less, with rents in the lower South island being largely flat, with the exception of Timaru where the median rent increased by a whopping 15.6 per cent.

A few areas such as Whangarei, Hamilton and South Taranaki showed slight declines.

While the rent increases will be painful for tenants they will be good news for landlords, who are currently benefiting from a winning combination of rising rents, low mortgage interest rates and low vacancy rates.

"It's been a huge help," said New Zealand Property Investors Federation president Andrew King. The combination of rising rents and low mortgage interest rates had increased many landlords' cash flows back to levels not seen since 2002.

However, landlords were also facing increased costs, with council rates in some areas rising up to 20 per cent and insurance premiums by 30 per cent, he said.

Landlords will also notice the impact the loss the depreciation allowance on buildings will have on their cash flows from April 1.

- © Fairfax NZ News