Be wary of raising rents

Thursday 8 July 2010

Landlords would be unwise to consider raising rents just yet, unless there is absolute room to do so, according to Barfoot & Thompson.

By The Landlord

The Auckland-based real estate company reported the average weekly rent in Auckland for June increased $5 from May to $403 and was up $15 from June last year.

However, Barfoot & Thompson chief executive Wendy Alexander says landlords need to be careful about how they read the increase in figures and says there is a lot of hype and speculation in the market around rents due to Budget changes and next year's Rugby World Cup.

Alexander says there are a few factors currently influencing the increase in rents, for example landlords anticipating higher upcoming costs and the fact a number of new properties have come onto Barfoot's management books, which always influence the figures.

But she says the more important issue landlords need to consider is that although rents are up $15 from the same time last year, it is merely a pattern of variation rather than a trend.

"They do go up and down," Alexander says.

To give some perspective around the June increase, the average rent in March, according to Barfoot figures, was $401 per week. June's $403 is also only $6 more than the weekly average in May last year of $397 and $4 up on April 2009's $399 (compared to $398 in April this year).

Alexander says if increases continue further into this year, then it may start to look more like a trend, but warns landlords not to increase rents unless there is definitely room to do so.

"Rents are steady as they go. Landlords would be unwise to shake good tenants by subjecting them to increases in rent."

However, figures from Trade Me for the second quarter of this year show Auckland listings for available properties to rent have fallen 32% compared to the same time last year, which has in turn pushed rents up 9%.

"Anecdotally we're hearing the drop in supply is due to reduced turnover as tenants are sitting tight on their properties and landlords are opting to lock tenants into long-term tenancies," head of Trade Me Property Brendon Skipper says.

Nationally, enquiries per listing are up 22% on the same period last year and Trade Me puts the national average rent at $380, increasing 4% from $365 in Q2 last year.

The number of rental properties listed nationally has also continued to contract, with supply down 18%.

Comments from our readers

On 9 July 2010 at 3:12 pm barry robinson said:
You can't rely on real estate agents to set rents at the maximum level - they are more interested in having lower rents and securing a long term tenant so they don't have to relet the property any time soon, which is the bulk of their work. I have observed numerous properties listed by agents that look to be significantly under-rented. Not really working in the best interests of their clients who pay them. I have been busy putting up rents on all my properties - one 4 br villa in Grey Lynn went up $50 and the tenants said they were moving out so I put it up $100 and it went within 12 hours with multiple offers of intent. Even a $10 increase is over $500 in your pocket at the end of the year, and with the way council rates keep going up plus the increase in GST on those rates and most other inputs into your property eg insurace, plumbers etc, you need to get every extra dollar you can. Plus interest rates are on the rise. It is a business, not a charity and the tenant will move out at the drop of a hat if it suits them (and with only three weeks notice, if you're lucky).
On 12 July 2010 at 5:55 pm Tony said:
I agree with Barry to a point,it is not Real Estate Agents who fail to increase rents it is the property owners themselves,one just has to check out the facts and figures in your excellent monthly property magazine to see where the rental market is headed.Surely it is the choice of the property owner to direct their property managers to review the rent from time to time.
On 13 July 2010 at 5:23 pm Steve said:
There are good property managers in market, real estate agents usually good at selling houses. Find a property manager who is interested in being your asset manager and not just a rent collector.Find the focus of the business and talk to the owner. Also should be a partnership from point of view that it is your asset and owners need to be actively involved.Landlords are the back bone of economy and good homes will get good tenants and rent well
On 17 July 2010 at 9:04 am Chris Donkin said:
with the new depreciation rules coming into force in april next year you would be silly not to consider an average $10 per week rent increase
Commenting is closed

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