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Rising apartment rents benefit investors

Auckland apartment rents have gone up by nearly 10% since this time last year – which means established investors are reaping the benefits in improved returns.

Thursday, October 22nd 2015, 1:22PM

by Miriam Bell

It now costs around $450 per week to rent an Auckland apartment, which is an increase of 9.8% on September 2014, according to September’s Trade Me Property rental data which was released today.

In line with the rising cost of housing in Auckland, the average asking price for apartments has also increased: Trade Me Property’s asking price data shows it is now above $500,000.

But Ray White apartment specialist Krister Samuel said the returns for apartment investors – particularly those who bought when prices were lower - are looking good.

While the average apartment price has gone up in recent years, lower interest rates mean the cost of the money required is significantly less, he said.

“Back in 2010, the net yield may have been more – around 8%- but interest rates were 6.5% to 7%. Now, the net yield is 5% to 6%, but interest rates are around 4%.

“This means that an investor might have to spend a bit more to buy an apartment these days, but they are basically going to be getting the same net return.”

On top of this, the growing trend for owner-occupiers to buy apartments means there are less apartments in the rental market pool.

“This makes for increasing demand for rental apartments, which pays off for investors.”

The September Trade Me Property data shows that, across the Auckland rental market as a whole, median asking rents have stayed steady at just under the $500 mark ($499) for the second month in a row.

Head of Trade Me Property Nigel Jeffries said this still represents a 9% increase on September last year.

Further, between September 2010 and September 2015, Auckland’s median weekly rent has gone up by almost 30%.

At the same time, the expected selling price of an Auckland property has increased by almost $128,000 over the same period, Jeffries said.

“This makes it more difficult to get on the property ladder and puts pressure on new landlords to recoup their costs.”

Nationally, the median weekly rent has remained flat and is up just $20 a week compared to the same time last year.

Excluding Auckland, median asking rents increased by 2.9% to $360 per week.

But they are up 20% compared to September 2010.

Jeffries said that, given the unyielding climb in house prices, the housing game has stayed firmly in favour of renters.

“The average property across the country is being let for $420 per week, the same rent as March this year and up only $20 per week on the same time last year.”

Both the Christchurch and Wellington rental markets weakened in the year to September 2015.

Christchurch saw a 6.5% fall in the median asking rent to $430 per week, while the capital’s median asking rent has gone up by just $5 to $380 per week.

Across the regions, three areas saw a drop in median asking rents with Gisborne and the West Coast down 17.6% and 9.3% respectively.

However, median asking rents in both Waikato and the Bay of Plenty were up, by 13% and 17% respectively, in the year to September 2015.

Jeffries said the rising rents in Waikato and Bay of Plenty were probably due to a step-up in activity as a result of the “Auckland effect”.

“This affects demand for rentals, as we’ve seen the number of available properties dry up over the past two years as people look to escape the tougher Auckland market.”

 

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 ▼4.14 ▲4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▼3.39 ▲3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.34 4.04 4.09 4.39

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