Landlords fear market wobbles

Auckland’s rental market has cooled because of landlords becoming more cautious, an expert says.

Infometrics chief forecaster Gareth Kiernan said landlords hadn’t increased rental rates due to falling optimism in the housing market.

Auckland’s rental inflation rate had slowed to 3.3 per cent, a new report on residential renting has found.

Nationally the renting inflation rate sat at a steady 4.6 per cent year-on-year in the September quarter because of a ripple effect felt from Auckland’s subdued inflation.

After the destructive 7.8-magnitude earthquake nearly a year ago, Ka¯ ikoura’s house rental market is feeling the pressure. The town’s rent increases hit a 20-year high in July of 44 per cent, but eased back over the last two of months.

Kiernan said Ka¯ ikoura’s rental market was volatile and would bounce around a bit before settling down. But this wouldn’t be for long as the road and rail rebuild had been tracking well.

‘‘By mid next year the market should stabilise. Then by the end of 2019 we could expect to see a reversal in inflation,’’ Kiernan said.

In Christchurch the opposite has happened, with rents in the city having dropped about 6 per cent in the past year.

New Zealand Property Investors Federation executive officer Andrew King said rental inflation nationwide was still running higher than the overall inflation rate of 1.9 per cent.

Rents were rising faster than they had historically. Before 2010, King said, landlords increased rent in line with the inflation rate.

Despite house price inflation having slowed in Auckland, the lack of rental growth meant rental yields had fallen to a new record low.

Infometrics’ rental report showed this trend had been mirrored around the country and would be amplified over the next two years because of a lack of expected capital gains in the housing market.