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21-10-2010

Rent increases will keep us in the game: King

Landlords.co.nz

Many landlords are facing the dilemma of whether or not to increase rents. An industry expert says now is the time to raise them.

By Carolyn Thomas

Put rents up or risk hitting us all in the pocket. That is the message from property guru Andrew King to landlords at the recent Auckland Property Investors Association (APIA) meeting.

He says while some landlords may fear losing good tenants, not increasing rents will keep prices down for everyone.

"This is our income - people put their fees up all the time," King says. "Tenants often expect it."

King says landlords can't absorb increased maintenance, insurance and rate costs. No longer being able to claim building depreciation from April 1will hit hard too. He says this alone will increase costs for landlords by an average of $14-$17 each week.

A mediocre outlook for house prices in the short term also heightens the need to focus on rents.

"Capital gains are great but rents and cash flow are really what keep us going," King says. "The good news is rents are increasing faster than house prices."

King says landlords need to be up to date with market rents especially in areas with higher costs of home ownership. The annual cost of owning in Auckland is approximately $9,000 more than renting and higher than the $6,000 national average.

"In Auckland there is even more reason to increase," King says.

Of course there is always a risk of a tenant moving out when rent goes up but he says it can often be mitigated. Making the property more valuable to the tenant like adding a small fence or minor redecoration can make a difference.

When setting rent, he encourages landlords to look at what else is on offer. "Every other business knows what the opposition is charging - we should be no different."

*Recent rent increases reported by APIA landlords

  • A four bedroom property in South Auckland increased from $390 including water to $405 excluding water per week.
  • A three bedroom property in Mt Eden (central) increased from $485 to $500 per week
  • A three bedroom property in Glen Eden (west) increased from $365 to $380 per week
  • A two bedroom property in Henderson (west) was recently tenanted for $320 per week plus water
  • A three bedroom home in Whangaparoa (north) increased from $350 to $400 per week.

Source: Landlords.co.nz

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