Unexpected fall in rents

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Rents on houses have unexpectedly dropped in May from their record of $300 a week to $295. The head of Massey University’s Real Estate Analysis Unit, Bob Hargreaves, says this result is “somewhat unexpected as rents have been rising steadily during 2007 and the first quarter of 2008.”

Monday, June 23rd 2008, 12:00AM

by The Landlord

However, on an annual basis, rents were still 5.36% higher than in May last year.He says the decreases appear to have happened mainly in the South Island.

At this stage it is unclear why there has been a fall. Hargreaves suggests two possible factors; A compositional issue (eg: increased numbers of multiple bonds for the same property), or an increased supply of rental properties.

There is plenty of anecdotal evidence that people have been unable to sell their houses for acceptable prices and have instead put them into the nation’s rental pool, becoming what are known as “accidental landlords”.

Supporting this theory is the significant drop off in the volume of house sales in the past year.

Wellington was doing better than Auckland on the apartment front, with a median weekly rent for three-bedroom apartments at $600, compared with $435 in Auckland, possibly because of areas of oversupply there.

The median rent between the two cities was $288 per week in Wellington and $280 in Auckland.

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