A cup of sweet tea and a blanket

If you’re an Auckland landlord, get out the cups of hot tea and the emergency blankets, because apparently your tenants are going to contract a serious case of rent shock.  You’ve heard of ordinary shock, diabetic shock, and perhaps even toxic shock, and you certainly wouldn’t want any of these unpleasant conditions.

Yet rent shock is a disease unlike any of these; and the horrifying news is that your doctor can do nothing to treat it.  This rare condition is brought about a rapid rise in rents – symptoms include a horrified expression, irritability, and a feeling of lightness about the wallet region.  Treatment is extreme: Pony up or move to Wellington.

Auckland rents are at record levels, reflecting a massive imbalance between demand and supply.  Now is a very good time to be an Auckland landlord, with brainy APIA president David Whitburn predicting rent rises of up to $150 during 2011.  If you listen to some stories, tenants are foaming at the mouth, throwing handfuls of money at landlords and pick-axing the knees of competitors.  (No, wait, that was Tonya Harding.  Well, you get the picture.)

Apparently, there’s a massive shortage of rental accommodation in Auckland, caused by a number of factors – the displaced Cantabrians are just the tipping point.  The past three years have taken their toll on landlords and aspiring landlords, from the global financial crisis to the tax changes.  The construction industry has had a similarly hard time, so too few new buildings are being created to house the increasing population of Auckland.

It’s not going to improve quickly.  Not only are new builds not going to pop up overnight, but first-time buyers are going to look at the cost of servicing a mortgage versus the cost of rent and start talking to their banks.  So Auckland landlords are going to be enjoying high rents for some time to come, and there ought to be some trickle-down to the rest of the nation’s centres, too.

So keep your rent somewhere near the market rate and enjoy it, because after the past few years you’ve earned it.  Just keep the Twinings and the Gingernuts handy, because that rent shock isn’t going to wear off anytime soon.