The Communication Agency

Quarterly Rental Update: Costs and risk of owning a rental are increasing

  • Rent increased by 4.7% in Q3 2017 compared with Q3 2016, with average weekyl rent for a three-bedroom home now $542
  • Average rent for properties in the Central Suburbs increased by 6.2%
  • Average rent for one-bedroom properties increased by 6.02%


Costs and risk of owning a rental are increasing

Third quarter figures (July to September 2017) released today by Barfoot & Thompson show the average weekly rent for a property in Auckland has risen by 4.7 percent to $542, from $520 during the same period in 2016.

Barfoot & Thompson Director Kiri Barfoot, who oversees the company’s property management division, says increasing costs for landlords and the increased risk of owning a rental property in 2017 are both major contributors to rent increases.

“Across Auckland, rent has increased by a little under five percent in the last year. We are just coming out of winter, which is a maintenance-heavy period for rental properties – add to that uncertainty around rates increases, increased insurance costs due to the fire service levy and the incoming Earthquake Commission levy, compliance costs for smoke alarms and insulation, and you can understand the context of rent increases.

“Many owners will be relieved at recent forecasts indicating that interest rates are likely to remain flat in the near future.”

Average weekly rent in the Central Suburbs increased the most of any area, rising by 6.2% from $550 in Q3 2016 to $584 in Q3 2017. Other areas with higher-than-average weekly rent increases included Eastern Suburbs, which rose by 5.5% ($628 versus $596), and Rodney at 5.7% ($538 versus $509). Areas with the smallest increases in average rent included Pakuranga/Howick, (3.1%; $576 versus $558) and Franklin/Manukau (3.3%; $452 versus $435).

“Demand for rentals in Ponsonby, Grey Lynn, Mount Eden, all the old Auckland City suburbs west of the Southern Motorway, is strong. The area boasts short commutes into the city, and the properties often have outdoor space, parking, and are close to shopping, dining and entertainment areas. At the same time, fewer new properties are being built because of high land costs when compared with other areas where denser residential developments can be constructed, or where land costs are lower,” says Ms Barfoot.

Commenting on the relationship between Auckland residential sales and the rental market, Ms Barfoot says, “I wouldn’t expect rent to flatten out as house prices in Auckland have. Just as Auckland rents didn’t increase at double-digit rates along with house prices last year, or the year before.”

Would-be home buyers pushing up one-bedroom rent prices

The largest rent increases in terms of property size were for one-bedroom homes, which averaged $359 per week, rising 6.02% from $339 in Q3 2016. In Central Suburbs, the increase for one-bedroom rentals was 9%, with average weekly rent increasing from $339 to $370.

“Almost 60 percent of renters plan to buy a home in the next two-to-five years, but we know that saving for a 20-percent deposit and tough lending restrictions are delaying people from buying.

“In the meantime, people are taking an interim step – choosing to rent on their own in between flatting and the traditional first-home buying stage. They are prepared to pay a little bit more for privacy, and are fortunate to have plenty of new developments to choose from.

“In Auckland Central, where a large number of apartments have become available in the past couple of years, rent for one-bedroom properties has increased at the same rate as the city-wide average, showing that the demand is there. Many of these new apartments have been in the higher end and will appeal to people moving on from a flatting situation, but who are yet to buy a place of their own.”

In Q3 2017, across Auckland, two-bedroom properties averaged $451 (up 4.14% from $433), three bedrooms averaged $542 (up 4.16% from $520), four bedrooms averaged $679 (up 4.13% from $652) and five-or-more-bedroom homes averaged $841 (up 4.7% from $804).


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