Earthquake refugees, dearer insurance and loss of tax break a fatal combination
Auckland faces a rent shock as the Christchurch earthquake diaspora, rising insurance premiums and the loss of a landlords’ tax break all affect demand on already scarce stock.
David Whitburn, president of the Auckland Property Investors’ Association, and Andrew King, vice-president of the NZ Property Investors Federation, predict Auckland rents will spiral by $100 to $150 a week in the next year.
That will put many three-bedroom eastern suburbs homes and city-fringe properties in the $700 to $800-a-week bracket — about $38,000 a year. The average wage is just under $1000 a week.
The two men said the earthquake and demand for rental housing would propel prices upwards. Severe underbuilding in the past decade would exacerbate the shortage. Big insurance rises after the quakes and the loss of depreciation tax breaks from the start of next month are other factors cited for the rent shock.
Mr Whitburn, a lawyer formerly with Russell McVeagh who owns 11 rental homes in Auckland, cited one landlord who will lose $23,000 annually in tax breaks as a result of last year’s Budget changes. Already tenants in the city are complaining of queues, picky landlords, being forced to lengthen fixed-term contracts and simply not being able to find a house or flat.
Mr Whitburn and Mr King said five-year fixed term rental contracts were not unknown and would become increasingly common. Mr Whitburn predicted rents would rise most sharply in suburbs surrounding the CBD, particularly Parnell, Ponsonby, Kingsland and Remuera.
‘‘Rents which are now $650 to $700 a week will go to $750 to $800 a week by this time next year,’’ he said. ‘‘Rents in outer areas like Arch Hill and Epsom will be up $80-$100 a week.’’
Mr King said monthly Tenancy Services Bond Centre data showed a new national rental of $325 a week, the highest recorded. ‘‘National rental prices increased by 3.8 per cent in the year to February 2011. Despite a supply shortage and increased demand, Auckland’s rental price has only increased a little more at 4 per cent. Mind you, last month the annual increase was only 2.7 per cent so it looks like the market is starting to take off in Auckland,’’ he said. Mr Whitburn said thousands of Christchurch earthquake victims were more likely to seek rental accommodation in the less expensive Auckland areas, citing one property manager who covers Titirangi, Green Bay, Te Atatu South and West Harbour who was getting inquiries. Three-bedroom houses in those areas were likely to be $300 to $400 a week or more, he said.
About 10,000 Christchurch people are thought to have moved to Auckland so far.
The Department of Building and Housing has also forecast rent rises. But property management business Crockers released information this week saying rents were not always rising and in some brackets had fallen.
Mr King said: ‘‘Despite news footage of Auckland would-be tenants queuing for rental properties, rental prices appear to be holding steady, rather than leaping skywards. In the two-bedroom market, January’s average national rent was $348 per week’’
Mr King said rents were still cheap and while inflation rose 4 per cent last year, rents rose only 3 per cent.
The Centre for Housing Research has released an Auckland Region Housing Market Assessment showing Auckland will need almost 170,000 new houses and flats in the next 15 years. Strong population growth will fuel big housing demand, creating the need for 169,530 new places.
In a radical departure from the current supply, many of these will need to house older people who are either couples or single so one and twobedroom places will be in biggest demand.