Investors driving Auckland property market
Last updated 10:31, January 22 2015
STEADY: Over the course of last year, rents were stable, in stark contrast with the real estate market.
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Low rent rises show the Auckland real estate market is being driven by investors, not a shortage of houses, a top economist says.
December rental figures from Trade Me show the national median rent rose 5.3 per cent last year, although it has stayed unchanged at $400 per week for the last five months.
Residential rent rises were also low in this week's consumer price index, up just 2.1 percent in the December quarter on a year ago.
Shamubeel Eaqub, chief economist of the New Zealand Institute of Economics, said the discrepancy between Trade Me and the CPI figures could reflect the fact that Trade Me captured only new rents, while the CPI included all of the rental stock, including unchanged rents.
Even so, last year's rent rises were right on their long-term average.
"If it was because of this massive shortage of housing, then we would see rents rising a lot," Eaqub said.
According to Trade Me, Auckland median rents were a static $450 in December compared to a year ago.
In Christchurch, where a shortage of houses is finally starting to ease, rents were up 5.9 per cent to $450 per week.
Eaqub said Christchurch's rental market had been "very synchronised" with house prices and consistent with a housing shortage.
By contrast, Auckland's rents have been rising at a fairly steady rate of 3 to 4 per cent for the last few years, while house prices had risen much faster.
"That suggests that it's investment and expectations of capital gain that is driving that demand," Eaqub said.
The other factor suppressing rent was incomes.
Landlords could not raise rents beyond the level people could pay and going by the yields they were getting, investors were implicitly saying they expected house prices to rise at around 8 per cent "forever", he said.
"Which is a very attractive rate of increase if it's sustained. But if it does increase at that rate and incomes are only growing at 4 per cent, then house prices will be many many multiples of income very soon.
"And no one except the wealthiest people will be able to afford houses," Eaqub said.
Trade Me's head of property Nigel Jeffries agreed that the rental market was focussed on capital growth.
Over the last five years, the weekly median rent had risen just $50, from $350 in 2009 to $400 this year.
"Clearly many landlords are more focussed on capital appreciation rather than yield," Jeffries said.
Regionally, only two of Trade Me's 15 regions showed double-digit median rental growth over the year.
Rents in the Bay of Plenty rose 13 per cent to $340 a week and Taranaki's increased just under 13 per cent to $350 a week).
Two regions saw declines in rent – Manawatu/Whanganui (down 4 per cent to $230 a week) and the West Coast (down nearly 6 per cent to $250 a week).
Wellington and Christchurch saw rental rises of 3.9 per cent and 5.9 per cent respectively.
Three and four bedroom houses continued to drive the rental market, but Trade Me noted that there was strong demand for units as a more affordable option.
Weekly rents for units rose 6.7 per cent over the course of last year to $320, with a 7.1 per cent rise in Auckland ($375) and 6.3 per cent in Christchurch ($340).
Rents for three to four bedrooms homes were 7.1 per cent higher at $450, and up 5.1 per cent in Auckland at $520.
Rent increases for Wellington and Christchurch medium-sized homes were more modest, 2.3 per cent in Wellington ($450) and 2.1 per cent in Christchurch ($485).
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