Development obstacles helping push rents up

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Difficulties securing finance, council red tape and the imminent depreciation changes are acting as disincentives to rental property development at the same time as shortages are driving up rents.

Wednesday, March 28th 2012, 12:00AM

by The Landlord

"There's little incentive to be an active landlord anymore," said First National Bobergs Wayne Boberg.

"There is no finance available for development or developers in the current economic climate after the demise of the finance company sector. On top of that, red tape with council consents and the cost of planning approval are anything but an incentive to build.

"The returns landlords can achieve with development just don't justify their investment."

Boberg said that with gross yields of between 4.5%/5% the norm, it was becoming more attractive for potential landlords to simply leave their money in the bank.

He also said the law change set to take effect next month to prevent depreciation being claimed on investment properties was having an impact.

"This has had the cumulative effect of making it difficult for new landlords to enter the market and for existing investors to grow their property portfolio, while keeping reluctant landlords in a holding pattern because they would have to pay back the depreciation if they sell."

Boberg was speaking as the First National quarterly property management survey revealed 46% of First National property management offices reported rents rising on last year, 43% says rents are the same and just 3% report decreases.

"Rents have increased due to a shortage of rental properties across much of the region - it's the basic economic principle of supply and demand," said First National general manager Colleen Milne.

Unsurprisingly, all of the Auckland First National offices reported rent rises across the board, a situation Milne said was unlikely to change until more rental stock becomes available.

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