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'Modest' increase in rents on the cards

CATHERINE HARRIS
Last updated 11:33 11/01/2012

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The group representing landlords has predicted that rents around the country may increase modestly this year.

Average national rents increased about 3 per cent last year, and the Property Investors Federation is forecasting another rise of around 4 per cent this year to help landlords offset rising insurance and other costs.

Federation president Andrew King said migration, while currently flat, had been increasing, and house building had dropped off, ''so you would have to think there's a bit of pent-up demand going on in there''.

''It'll hit pretty soon. We're just starting now into the busy period for rents so for the next two months, that's when there's going to be a lot of demand.''

However, he acknowledged that this would not be true for all parts of the country, particularly Wellington, where the local economy was flat.

King said low interest rates had sheltered many landlords from rising costs but many would only realise the impact of recent tax changes on rental properties when they put their tax returns in this year.

He estimated the removal of depreciation tax credits would add 5 per cent to the average weekly rent of $338.

''Given that that's 5 per cent and rents only went up by 3.1 per cent and general inflation was 4 - I don't think enough people have realised how it's going to cost them.''

While some landlords are expected to pull out of the rental market because of slim margins, King said experienced investors were going against the tide and snapping up new properties.

New investors tended to avoid the property market when capital gain was non-existent.

''But I think most experienced investors are realising that right now is a good time to buy. So a lot of our members are actually buying at the moment because cashflow is good and there's not a lot of competition, really.''

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- BusinessDay.co.nz

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