Landlords 'feel pressure to increase rents'

20:53, Apr 01 2014
Rototuna resident Graham Carter
NOT HAPPY: Rototuna resident Graham Carter has had his rent significantly increased from $420 to $500, which he thinks is astounding for the ‘‘basic’’ property he lives in.

Reality is "kicking in" for renters - especially those in Rototuna - as price hikes across Hamilton follow growing costs for landlords.

An increase in the Official Cash Rate (OCR), pressure on the rental market because of the Loan-to-Value Ratios, increased insurance costs from the Christchurch earthquakes, and rates increases from councils are all putting pressure on landlords. Now the prices are being passed on to tenants.

Lodge Real Estate managing director Jeremy O'Rourke said the price ceiling in Rototuna of $500 a week had been "well and truly breached".

"It's an increasingly popular area for people to rent in," he said.

"Properties that used to rent for $450 are now renting for over $500."

He said Rototuna was "pressing up at a faster rate" than other areas around the city, driven by increasing demand for its modern homes, good access to schools and warmth.


General manager for Harcourts Rentals, Melanie Rouse said rents had been heading north over the last few years, but landlords were now in the position of needing to lift the rate of increase.

"Landlords are wanting to [put up rent] as well obviously because of the extra costs they're incurring with insurance and that sort of stuff, but it's raising more in the good areas, so Rototuna, and school zones," she said.

"They're trying to pass costs on. They'll definitely be getting less yields than they were a while ago."

She said the other factor influencing rent rises was new housing.

"The average rent for that area rises if you have a whole lot of new houses pop up.

"We've just seen that around the lake with the Queen Park development. That was about 38 houses and they're all getting about $420 a week for a three-bedroom house which raises the overall rent for that area."

She said the flow-on effect of new houses was that "landlords have to maintain their older properties better" as people had higher expectations.

The president of Waikato property investors association, Nancy Caiger, said that landlords needed to be aware of cost increases coming up, and pass them on fairly.

"I would certainly recommend that if they [landlords] have a tenant they value and they've had for a while that they sit down with them and say this is the situation, this is where I have to get to.

"On the other side of the coin . . .they're [tenants] only going to leave and then you're back to square one."

She said while there were situations where rent simply had to be increased, "there are certain times where you need to absorb some of the costs".

"It's not a good policy to pass a big increase on to good tenants."

She also warned landlords to maintain properties.

"It may be that they haven't been diligent at increasing their rent and suddenly they feel that they've got a lot of catching up to do."

She said prices would continue to head up if the Reserve Bank re-classified landlords with more than five properties as a business. This could mean they paid more to borrow from the banks.

On top of that, politicians were debating the expansion of a Warrant of Fitness system for landlords.

"This blanket thing that they are trying to introduce is something to watch out for because it passes on another tier of cost," she said.

 $80 rent increase prompts tenant to make a move

Graham Carter was shocked to have a letter arrive in his mailbox stating that his rent was about to increase by $80.

Carter had been living at the Thomas Rd property in Rototuna for a year, and said the letter stated he and his wife were "very good tenants" and the increase to $500 per week rent was below market rate to reflect that.

However, Carter said there was no way the "basic" property was worth that much. He and his wife had checked out a number of properties in the area and were certain the Thomas Rd house was overpriced.

"The property is quite substandard and definitely not worth $450 to $460 per week," he said.

"My question is what properties did they base their review on?"

He signed the lease agreement for another rental house on Monday, and said he had little trouble finding the new place.

"The real estate people state that there is a shortage of properties but we haven't found that to be the case.

"I would say there is an over-abundance, there is a lack of properties that are in the nice-to-upper level, as some properties less than 10 to 15 years old are appalling."

He and his wife decided to move out of the Thomas Rd property when the letter arrived.

But general manager at Quinovic for Hamilton and Cambridge, Mark Laurence, said the rent increase was in line with the average rent for a similar property, according to the Department of Building and Housing.

He said interest in the property also "tells us that it's priced right".

Rents were going up across Quinovic's 65 properties in Rototuna and across the city, Laurence said.

This was a response to "pressure from our owner clients demanding higher rents because of their increases".

"If we're confident that we can get the rent for the property then we have to increase it so that the rental property is sustainable for these people," he said.

When asked why the costs passed on to Carter weren't done incrementally, Laurence said: "The tenant wasn't paying market rate to start with, so he's got a very good deal for a long time, so reality is kicking in now."

Waikato Times