The average weekly rent in Auckland could hit $600 by the end of the year, figures from the city’s largest real estate agency suggest.
Barfoot & Thompson, which tracks the average rental price for more than 16,500 homes across the city, says rental prices last year rose more slowly than years prior, with the average rent up $15 a week to $582.
However, despite the slowdown in growth, weekly rents for Auckland are still on trajectory to reach the $600 mark by December 2020.
Barfoot & Thompson director Kiri Barfoot says that while average weekly rents range from a low of $324 for a one-bedroom flat in Franklin, Manukau or South Auckland to $1098 for a five-bedroom house in the eastern suburbs, demand is shifting from larger properties to smaller ones as affordability became an issue.
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“The demand is for smaller properties, one or two bedrooms. As prices increase, people are squeezing into a two bedroom place where previously they’d have gone for a three-bed," Ms Barfoot says.
“Across the board, people are wanting homes in school zones, handy to the university and bus zones. That’s why the highest prices are in central and eastern suburbs and the North Shore.”
She says that demand is well exceeding supply – on average a property may have five applicants, but good ones in school zones and on bus routes might get double that. Some properties are vacant for only a day, anything longer than a week is probably a result of a landlord “being quite particular” or not getting the price right.
And while landlords are facing higher expenses to meet new insulation and heating standards, Barfoot says most are cautious about steep rent increases.
“They need to have the extra cash flow coming in, but don’t want to lose good tenants. $15 increase is a lot of money to the average family on a budget, so they wouldn’t want to lose the tenant by putting up rents $20 or $30.”
Barfoot says that, she hasn’t seen landlords abandoning the business by selling their investment properties, and those who are are replaced by another landlord. Some landlords are “accidental” – that is renting out the family house while they are out of the country, or a deceased estate – but she is sceptical of Auckland Mayor Phil Goff’s idea to encourage” ghost house” owners into renting their properties.
“Being a landlord is not an easy job, there’s a risk, it’s harder to move on anti-social tenants and there are more hoops for tenants to jump through. So if you don’t need the cash flow, all those extra costs add up in small doses.”
While Barfoot won’t put a number on it, she says there is a clear need for more rental properties in the Auckland market and she encouraged people to consider investing in rental property or expanding their existing portfolios.
“Yields in many segments of the market still present an attractive opportunity when compared to other traditional savings and investment options,” she adds.
While Barfoot & Thompson offices haven’t seen any new surges of student renters as the university year opens, in Scarfie city Dunedin, rental demand has already outstripped supply.
Edinburgh’s group manager of property rentals, John Hornbrook, one of the city’s biggest rental management companies, says that stock has already gone.
“Normally we would have flats not rented out, but all our flats were rented before Christmas.
“The price have increased, even student prices have always been reasonably expensive. Maybe only $5 a week from $120 to $125 per bedroom in a five-bed flat, but it will create an impact.”
He says that with the growing university student and staff population, plus an influx of tradespeople for the new hospital and university builds growing demand by thousands, the city is heading towards a crisis.
“It will create a scarcity,” Hornbrook says.
In Wellington, the rental squeeze is affecting not just the traditional student house hunters but even young professionals. Earlier this month, a $640 three-bedroom flat in Petone attracted a queue of eight groups while in the city, a $750 three-bedroom townhouse in central Thorndon charging had "pages of applicants" according to one frustrated house hunter and flats were rented out within minutes of their open viewing.
There are similar stories in Rotorua and Tauranga, where rental supply has not kept up with the growing population.
