This is a question we get asked frequently and typically we don’t have who you would expect asking it… Most people would assume that investors would be asking this question worried about yields and returns, however they are well aware of the market and know that they are getting the best returns that they have seen in years. The people that actually ask us about rent prices going up are those people who are currently renting.
If you’re renting a typical three or four bedroom house, you will know that over the past five years rental prices have increased 5%+ each year and with new government regulations which will be implemented over the next 18 months many landlords will be looking to recoup those costs by increasing rent prices even further. Five years ago you may have paid $470 per week for a three bedroom in a mediocre suburb, whereas now, this could be $600+ per week. If rents continue to increase it means that the price of renting (which is simply you paying someone’s mortgage for them), may exceed the cost of paying a mortgage.
As we evaluate whether rent prices are going to increase, we first must understand why we are asking that question? Is it because you’re renting and worried that you are not going to be able to afford living in your current property, are you an investor thinking about buying another rental and want to make sure that you are in a net-neutral position when it comes to gearing the property so the rental covers the mortgage repayments, or are you like most of the clients we deal with who are looking at buying their first home and realise that owning a home in the long run is a better option than renting and also with the current market may mean that you are actually saving money.
Currently the simply answer to the question is yes. Rent prices are increasing, and as mentioned above they have been steady, however is the future going to continue the pattern? Well, rent prices haven’t gone down in the last 20 years, so that is one sign that they will continue to increase, the other is purely in the figures; we have spoken to several property management firms, including; Harcourts, Barfoot and Thompson and many others and they are all in agreement that rent prices will steadily increase. The areas which have had the lowest annual rent increases were the Eastern Suburbs (+3.1%) along with Pakuranga and Howick (+2.3%), whereas the highest increases were in West Auckland (+5.35%), North Shore (+4.46%) and Rodney (+4.76%) [based on 2018 figures in Auckland]. Now the to answer the question, with another question, “Why are rents rising?” and the answer to this is simple, supply and demand. We have an ever growing population, with a construction industry that is failing to keep up, along with this the government via the KiwiBuild initiative has promised to build 100,000 homes which aren’t currently even close to building 0.2% of this. Along with that as mentioned above there are new policies which are going to cost landlords more money inclusive of the new policy from Labour mentioned in a recent press release; “Andrew Little’s Healthy Homes Guarantee Bill is currently before Parliament. It will set standards that will require all rental properties to meet proper standards in: insulation, heating, ventilation, draught stopping, and drainage. This will ensure people who live in them don’t get sick.”
Because of all of these points and statistical and empirical data rent prices are going to increase, the question you’ve now got to ask yourself is, “should I be taking advantage of this?” The answer is “YES”, if you’re a first home buyer the time to act is now, if you’re an investor the time to act is now, so make sure you talk to us today.