Auckland rent juggernaut kicks back into gear

Auckland landlords are passing on the costs of larger mortgages to tenants as the city turned its first significant rental increase in some time, with median weekly asking rent hitting $520.

The Auckland juggernaut has kicked back into gear as asking rent rose by $20 a week, figures from the April Trade Me [NZX: TME] property rental index show.

Trade Me Property head Nigel Jeffries says the median Auckland asking rent has been stagnant for the past 10 months. Last month’s rise was just over 7% on last year and a record high.

The bulk of rental properties in Auckland are medium-sized houses – three and four bedrooms – which stepped up to $565 a week in April, and an annual cost of $29,380.

Mr Jeffries says the Auckland apartment market has been stagnant over the past year with median weekly rent of $450. However, there was a significant increase to a new record high of $490 a week last month.

“There has been an adequate supply of rental property in Auckland for a long time, which has kept the city’s rental market pretty stable but we’re seeing a shift now,” he says.  

“Demand is clearly increasing and landlords are taking the opportunity to increase the yield on their investments, and I don’t expect this will be the last record we’ll see this year.”

Auckland’s rent increases last month were reflected across all property sizes, with each segment hitting a new high.

This remains far less than the interest-only component of a mortgage in the city. With an average asking price of $862,300, a medium-sized home has a weekly interest of $912 – ignoring the 20% deposit or any principal mortgage repayments.

The median weekly rent nationwide hit $440 last month – up almost 5% on last year – and renting a typical Kiwi house is now nearly $23,000 a year.

Halo effect
The regions surrounding Auckland are also seeing the impact of the “halo effect.”

Mr Jeffries said median asking rent in Northland  is $350 a week, up 16.7% on last year, rent in the Bay of Plenty is $400 a week, up 12.7% and Waikato $360 a week, up 9.6%. “These areas are seeing huge demand, akin to the ‘for sale’ markets in the regions.”

Outside the “halo zone,” the star performer was Manawatu/Wanganui which has seen a steady rise over the past six months from $250 a week to a new record high of $280 a week. A year ago rents were just $230 a week, where they have been hovering for the past five years.

In contrast, the South Island has been quiet, with Canterbury seeing an 8% year-on-year decline, in line with the trend of the past eight months.

Since the peak of the market in March 2015, the median weekly rent has fallen from $485 to $400 a week, down 18%.

(Click to zoom)

Follow NBR on Facebook, Twitter, LinkedIn and Instagram for the latest news and free on-demand audio from NBR Radio.