Outlook good for rent rises: Crockers

Rental inflation should gain momentum and run ahead of growth in house prices this year, Crockers’ latest market research says.

Monday, April 7th 2014, 12:00AM

by The Landlord

It has partnered with economic forecasters Infometrics to produce a report that offers predictions for the year ahead.

In it, it says that residential rental inflation has been subdued in recent months, except in Christchurch.

“Rental inflation has been surprisingly weak in Auckland over the last 12-18 months, but there have been signs of more upward pressure in the first two months of 2014, with rental growth in the region reaching a 22-month high of 5.3% per annum.”

Population growth and the strength of the economy would boost demand, the report said.

It also looked at the possible future track for house sales and prices.

It says the loan-to-value restrictions have had a noticeable impact in the market, as banks pulled back much further than they had to.

“The share of high-LVR lending has been low because at least some trading banks have underestimated demand for low-LVR lending and, therefore, how much high-LVR lending they could safely approve. The banks have also initially taken a cautious approach to high-LVR lending to ensure they stayed well within the mandated limit.”

The report predicts that house sales will remain static throughout this year but that the dampening effect of the rules will be temporary. It says economic conditions are still conducive to further price rises.

Infometrics predicts house price inflation will be running at 2.4% a year by the end of 2014 but will surge again next year.

It expects nationwide house price inflation to peak at 14% in 2015/16, before higher interest rates put the brakes on.

"Some reversal in prices is possible in 2017 and 2018 as economic growth slows and the undersupply of housing in Auckland and Canterbury is largely resolved."

« Busy March for agents: Barfoot

Free Investment Property Showcase Events: Auckland, Wellington and Christchurch »

Special Offers