• Vacancy rate has been steady at 1% for at least one year; over 100,000 enquiries for Q1 from prospective tenants
• Average rent increased by 4.6% in Q1 2017 compared with Q1 2016, with average weekly rent for a three-bedroom home now $531
• Average rent for new tenancies has increased by 7% in Q1 2017, compared with Q1 2016
Rental market showing signs of pressure
The Auckland rental market is showing signs of being under pressure according to the latest data from Barfoot & Thompson Auckland’s largest property management company. Vacancy rates remain extremely low, the average rent for new tenancies has increased at a faster rate than the overall average, and Barfoot & Thompson is seeing record online registrations to view properties.
“The Auckland rental market is under strain. Both landlords and tenants are beginning to feel it”, says Barfoot & Thompson Director Kiri Barfoot.
Barfoot & Thompson’s data shows that for every rental property that becomes available on average there are 44 prospective tenants. Barfoot & Thompson received 107,268 enquiries between January and March this year.
“We introduced online booking for rental property viewings in 2015. Tenants are able to enquire about a property anytime and questions can be responded to around the clock. It has streamlined the entire process for renting by opening up communication, giving automatic reminders for viewings, and providing an easy link for people to apply for a property with no paper forms required.
“The system has also given us data on rental property demand. On average around 20 people register online to view a property, but we’ve seen incredibly high demand in some instances. A record 105 people registered online to view a single rental property in Epsom recently, which was unprecedented”, says Ms Barfoot.
The vacancy rate for properties on Barfoot & Thompson’s portfolio of more than 14,000 rental properties remains at 1-2%, which equates to properties being empty for around 5 days in between tenants. This has been the case for more than a year.
In Auckland City, which encompasses the central and eastern suburbs, as at 8th of May 2017 there are just 209 homes available for rent through Barfoot & Thompson. Most central suburbs have three or fewer properties for renters to choose from. The situation is replicated across the rest of Auckland. On the North Shore there are 77 properties, in Waitakere 71, and in Manukau 133.
“We are Auckland’s largest private property management provider. The number of properties we manage has been increasing 9% year-on-year, so it’s not a matter of fewer listings; rather there are simply not enough rental properties to go around.”
Average rent rising faster for new tenancies
Average Auckland rent continues to rise at a relatively reasonable pace despite the high demand for rentals, increasing property sales prices, and more restrictions on finance for buying properties.
Across Auckland renters paid around 4.6% more on average in the January to March quarter (Q1) of 2017, compared with the same quarter the year before. Average weekly rent across all property types and locations was $531, up from $508.
Average rent rose more in South Auckland (6.4%), and slightly less in Central Auckland, Franklin/Manukau, and Pakuranga/Howick (2.8%, 3.2% and 3.4%, respectively).
For new tenancies only, average weekly rent rose 7% to $571 in Q1 2017 up from $533 in Q1 2016. This compares with per annum increases of 6.1%, 2.4% and 4.6% as measured for Q4, Q3, and Q2 of 2016.
“There are fluctuations in rent for new tenancies; however, rent for new tenancies is rising. Landlords are having to face the reality of needing cashflow to maintain and improve their property, cover increasing insurance and rates, and to prepare for increasing interest and compliance costs”, says Ms Barfoot.
“Landlords typically own one, maybe two properties. Residential property is a conservative investment and landlords don’t like increasing rent. They prefer a trustworthy long-term tenant who pays the rent on time and looks after the property. When a property is vacated, this is a far better time to balance costs versus incoming rent.”
Rent for one and two bedroom properties continue to lead increases
The largest rent increases in terms of property size were for one and two bedroom homes for the past two quarters. For Q1 2017, one bedroom properties averaged $348 per week (up 5.5% from $330 in Q1 2016), and two bedrooms $437 (up 5.1% from $421).
A three bedroom home averaged $531, rising less than 1% on last quarter ($525) and 4.3% on the same quarter in 2016 ($509), while 4 bedroom homes brought in $666 (up 3.8% from $641) and 5+ bedroom homes averaged $826 (up 3.7% from $796).