Caution urged on rent warning
susan.edmunds@stuff.co.nz
What tenants can and are willing to pay is a bigger driver of rent rises than any government policies, experts say.
Last month, the New Zealand Property Investors Federation (NZPIF) warned that rents were increasing quickly. It said there was a risk that would continue as the Government introduced new obligations for property investors, which made owning a rental property a more expensive business.
NZPIF data showed rents were up 6.1 per cent across the country in the three months to March, about twice the annual increase recorded in the same quarter in 2017 and 2016.
But others questioned the data. Analyst Rodney Dickens said statistics from the Ministry of Business, Innovation and Employment suggested the pick-up in rents was only 4.6 per cent in that period.
Dickens, who runs Strategic Risk Analysis, said the impact of rule changes on rental prices would be limited.
He said income growth had a much clearer link to rent rises.
‘‘The lack of acceleration in private-sector rental inflation in recent years most likely reflects a constraint from income growth that hasn’t increased. The more Labour’s policies boost wage and salary incomes, the greater scope there will be for private-sector landlords to put up rents.’’
Supply and demand was also an important factor, he said. In parts of the country where there were not enough rental properties, rents could be expected to rise quickly.
But landlords in those regions had probably already increased their charges by more than the average, anyway, so would not push them up again because of new rules, Dickens said.
In parts of the country where there was a surplus of rental properties, and where tenants had more choice, investors could not charge more rent even if their costs increased substantially.
Economist Cameron Bagrie, of Bagrie Economics, said rents nationwide had been rising at a rate of about 5 per cent for the past few years, and Auckland at about half that for the last 12 months.
He said the argument that a change in policies would drive up rents was incorrect. If it was that easy to do, landlords would have already done it over the past few years. But he said the market would change.
Many investment properties generate so little in rent compared with the price paid to purchase them that they do not stack up as an investment without capital gains from rising house values.
Changes that increased landlords’ costs would make them more expensive to hold. If the market slowed and capital gains were not available, new investors might try to cash up, he said.
It would be up to long-term investors to pick up those properties. ‘‘The issue is at what price.’’