What's driving property rentsea
While the national median for residential rents has remained the same over the past couple of years, different regions have experienced different fortunes.
Thursday, April 6th 2000, 12:00AM
by Paul McBeth
The national level of median rents has remained static over the past two years, at $190 per week for residential housing.
That's according to a recent report by Massey University's Real Estate Analysis Unit, which found that rents have actually fallen in the Auckland region and for most North Island cities from January 1998 to January 2000. South Island cities, except for Dunedin, have also shown slight reductions.
However, the report says Wellington has been "a notable exception" and recorded a small increase in median rents.
The Massey report also looks at some of the key factors affecting residential rent levels:
Demographics. That's the rate of population growth and the absolute size of population in a city. Population pressure usually means increased demand, so higher rents and higher house prices. The report says that future immigration patterns are likely to only have a relatively minor effect on the demand for rental accommodation.
Location. Rents in Auckland are the highest in the country and that's likely to continue. The losers will probably be provincial cities, particularly on the West Coast and in the South Island. Wellington City rents are expected to remain much higher than in the neighbouring cities of Porirua, Upper Hutt and Lower Hutt.
House Price Appreciation. Historically, it says the difference between an average return on investment and a good return is mainly a function of house price appreciation. Average annual house price increases for Auckland City over the ten years 1989-1998 were far higher than all other areas.
Flats versus houses. In general, tenants pay more per bedroom for houses than they do for flats (see table below). That's according to data from the Tenancy Bond Centre, where flats are defined as having one or more common walls with another dwelling.
Bedrooms. The report says that, within a given area, the number of bedrooms is the most important determinant of residential rents. "Research indicates that 80 per cent to 95 per cent of variations in the median rents within a city can be explained by the number of bedrooms."
"Intuitively, this finding makes sense because in a mixed flat tenants prefer to have their own bedroom. Similarly in a family situation there is a preference for children to have their own bedroom. Also, the number of bedrooms is highly correlated to the size of the unit."
Percentage difference in rents for flats compared to houses
|
Area |
Two bedroom |
Three bedroom |
|
North Shore |
- 12% |
-6% |
|
Waitakere |
-8% |
-4% |
|
Auckland |
-10% |
10% |
|
Manukau |
0 |
-4% |
|
Hamilton |
-19% |
-3% |
|
Tauranga |
-9% |
-15% |
|
Napier |
-6% |
-20% |
|
Palmerston North |
-16% |
-5% |
|
Porirua |
-3% |
-35% |
|
Upper Hutt |
0 |
-30% |
|
Lower Hutt |
-23% |
-17% |
|
Wellington |
-8% |
-2% |
|
Christchurch |
-14% |
0 |
|
Dunedin |
0 |
4% |