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Auckland Landlords Foresee Modest Rent Increases

Auckland Landlords Foresee Modest Rent Increases

Although the majority of Auckland landlords intend to increase rents in the coming 12 months, the increases will not be sufficient to compensate them for the higher outgoings they will be facing.

“While two thirds of landlords are intending to increase their rents, by far the majority see that rent rise being 5 percent or less,” said Barfoot & Thompson Director, Kiri Barfoot.

“With the current average rent for a 3-bedroom home being $472, that represents a maximum increase of $24 a week.”

Barfoot & Thompson’s bi-annual landlord survey revealed that 82 percent of its landlords expect to pay even higher mortgage interest rates in the coming 12 months.

“It means that the majority of landlords are prepared to accept lower returns.

“Based on an average sales price for a 3-bedroom home of $677,000 and an average rent of $472, landlords are currently receiving a return of 3.63%.

“If landlords follow through with their stated intentions, the rate of return in the coming 12 months will be even lower.

“They are already facing higher outgoings in the form of increases from Council rates, mortgage borrowing costs and insurance, and anticipate even further increases in mortgage rates within the next 12 months.

“Given the increased costs they have to meet, there is justification for rents to increase beyond 5 percent, but less than 20 percent of landlords intend doing this.

“In many instances, the decision to hold or only marginally increase rents will be based on landlords acknowledging and rewarding good tenants.

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“Being a landlord is a medium to long term investment decision, and landlords put a great deal of value in the long-term retention of good tenants.”

In the survey, two thirds of existing landlords indicated they were not intending to increase their portfolio’s size in the next 12 months, while an additional 6 percent had plans to decrease their holdings.

“Among existing landlords, in a market where property prices are increasing, and costs are rising, there is not a great appetite to buy more property.”

85 percent of respondents expected the value of their portfolio to increase in the coming 12 months.

Ends

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