Rent inflation in regional areas follows belated effect of housing boom

BUOYANT housing prices in regional areas have begun to flow into higher rents, as Clutha and Gore record their fastest rental growth in a decade.

Data from Infometrics on renting comes hard on the heels of Real Estate Institute of New Zealand statistics showing house prices were up again for June in many regional areas, including Otago and Southland, by at least 8%.

Infometrics chief forecaster Gareth Kiernan said nationwide, rental inflation had held steady at 4.7% in the quarter to June.

‘‘However, there were contrasting regional trends hidden beneath this headline number,’’ he said in a statement.

He said Whangarei, Hamilton and the former Auckland city area all recorded their weakest rental growth in at least three years, for the June quarter.

Although the broader upper North Island housing market was slowing, due to affordability and loan to value ratio restrictions on investors, Mr Kiernan was surprised that rental growth in those areas was weakening, given the undersupply of Auckland homes and ‘‘relatively strong’’ population growth.

‘‘But around many other parts of the country, where the housing boom took longer to materialise, rental inflation is running at its fastest rates since the global financial crisis or earlier,’’ Mr Kiernan said.

He said Clutha, Gore, Gisborne, Hastings, the Kapiti Coast, Porirua and Upper Hutt had all recorded their fastest rental growth since at least 2008.

Gore rents rose about 12%, while in Kaikoura they rose by about 18%.

‘‘Strong price growth in the latter part of the housing boom seems to be encouraging investors to reevaluate their returns and put up rents if possible,’’ he said.

Another factor which might also push up rents in the medium term is proposed changes to rental regulations, Mr Kiernan said.

The delayed pickup in the housing market in other parts of the country was showing through in rents elsewhere, as Rotorua, Wairoa, Tararua, Masterton, and Kaikoura all recorded their fastest rental growth on record, since 1994, Mr Kieran said.

On the renting outlook, Mr Kiernan expected the upward pressure on rents outside the main centres to ease in the coming quarters, as the housing market slowed.

‘‘However, in the main centres, where housing remains in short supply, further rent increases are possible in response to conditions of strong tenant demand,’’ he said.