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Rents on the rise as capital gain sours

Friday 1st October 2010

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Rents are on the rise nationally, says auction site TradeMe, as the supply of rental properties continues to decline and residential property investors chase cash flow rather than capital gains. 

The phenomenon was predicted in Treasury working papers released earlier this year and prepared for the Tax Working Group, as it considered how to stop the tax system stoking over-inflated house prices and help prompt a change in national savings and investment habits.

The Budget this year included tax changes contemplated in the working paper, which looked at whether removing relatively minor tax concessions available to landlords, of the kind enacted in the 2010 Budget, would lead to higher rates of home ownership.

The study concluded that such tax changes would be "at the expense of a decrease in the welfare of those who rent."

TradeMe Property's Brendon Skipper said that over the three months to September, rental listings on the auction website were down 12% against the same period a year ago, and followed an 18% drop in the June quarter. 

On the rents front, "the average national rent was up 5% compared to the same period last year, and on a par with the rent increase observed in the June quarter," he said.

"Auckland stood out as the only city to see rents increase by double figures: up 11%." 

Bucking the trend were Rotorua and Tauranga, where rental supply via TradeMe listings rose strongly, by 11% and 18% respectively, over the third quarter of 2009. 

Wellington listings also rose dramatically, but largely because Soho, a large inner city apartment complex, had begun renting during the period.

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