Quarterly rental update: Tenant rents rising slower still; landlord yields perking up
The trend of slower-paced rent rises continued through the third quarter of this year, according to the latest data from Barfoot & Thompson, which manages more than 16,500 properties in Auckland.
The average weekly rent for a three-bedroom* home in Auckland cost just 3.2% more during the period ending 30 September 2018 than it did during the same period in 2017.
“This represents a real cost increase of around $17 per week compared to last year,” explains Barfoot & Thompson Director Kiri Barfoot.
“The increase is $2 lower than last quarter and is now the lowest average weekly rent rise that we have observed in well over two years.”
The average weekly rent for all properties (all bedroom sizes and eligible suburbs) was also lower than the historical norm, up 3.5% year-on-year to $563. This compares to recent increases of as much at 4.8%.
The average cost of renting in Central Auckland rose the most of any suburb during the quarter due primarily to a growing number of large, luxury apartments pulling in higher weekly rents, while demand in West Auckland saw it come in second place with a year-on-year increase just over 5% for the quarter.
Average weekly rents for homes in Pakuranga/Howick, and for homes with five or more bedrooms increased the least, up 2.2% and 2.1% respectively.
Yields on the up
Meanwhile, a look at gross rental yields** across the city reveals many landlords will be starting to enjoy a rebound in potential rental returns, despite the slower pace of rent rises.
“More than two-thirds of the Auckland suburbs we reviewed this quarter showed an increase in gross yield over the same period last year, with all but a handful sitting above 3% return.
Ms Barfoot says that while it is an ‘on paper’ measure only, it’s a welcome move in the right direction for landlords.
“This follows a period of relatively flat gross yields during 2016 and 2017, and declining yields prior to that, so landlords will be relieved to be making up some lost ground.”
She says this, coupled with low interest rates and a desire to keep properties occupied with good tenants, could be contributing to landlords’ reluctance to raise rents further.
“That said, many landlords will be looking at their increasing operating and compliance costs, as well as the changes that may come from pending rental reforms, and reassessing. It remains to be seen how these factors will impact the cost of renting in future.”
Average weekly rent received across Auckland
Quarter 3 (July to September) 2018 vs same period 2017
|
No Bedrooms |
% change Q217 v Q218 |
||||||
|
1 |
2 |
3 |
4 |
5+ |
Total |
||
|
Central Auckland |
$408 |
$570 |
$1,076 |
|
|
$496 |
5.46% |
|
Central Suburbs |
$379 |
$500 |
$635 |
$813 |
$1,049 |
$607 |
3.85% |
|
Eastern Suburbs |
$379 |
$513 |
$665 |
$907 |
$1,062 |
$645 |
2.80% |
|
Franklin/Manukau Rural |
$308 |
$366 |
$447 |
$561 |
$654 |
$470 |
4.70% |
|
North Shore |
$397 |
$478 |
$595 |
$738 |
$923 |
$616 |
3.99% |
|
Pakuranga/Howick |
$346 |
$455 |
$557 |
$676 |
$785 |
$589 |
2.16% |
|
Rodney |
$345 |
$438 |
$534 |
$665 |
$817 |
$557 |
3.40% |
|
South Auckland |
$310 |
$408 |
$499 |
$597 |
$724 |
$497 |
3.56% |
|
West Auckland |
$331 |
$425 |
$513 |
$621 |
$752 |
$516 |
5.05% |
|
Auckland |
$370 |
$469 |
$559 |
$697 |
$859 |
$563 |
3.51% |
|
% change Q217 v Q218 |
3.08% |
4.01% |
3.17% |
2.64% |
2.11% |
3.51% |
|
Table source: Barfoot & Thompson averages for managed tenancies as at end of each month in quarter. Categories with less than four tenancies are not included.
*Based on statistics from approximately 16,000 Auckland rental properties managed by Barfoot & Thompson. This includes more than 6,700 three-bedroom properties, which have been chosen as the standard example to provide the best insight into the ‘typical’ weekly rental price in Auckland.
**Average annualised rental income divided by median sale price within the same area. Only suburbs with sufficient sales data for the period where reviewed.