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10-15 per cent rates rises will lift city rents

auckland_skylineThe $99 plus GST "transport levy" Auckland Council is going to impose on households, on top of already large rates increases, may lead to higher rents.

The levy, when added to planned rates rises, means Aucklanders' rates bills will go up by 10 per cent on average next year. Some homeowners in leafy inner-suburbs face rises as high as 15 or 16 per cent.

When extra costs fell on landlords they tended to get passed through in time, said Crockers' property management expert Joe Schellack, though in some cases that might take a full year.

Andrew King of the NZ Property Investors Federation says rates rises lead to rent rises.

Landlords could only raise rents as fast as the market would allow, which might mean rent rises fell unevenly across the city, he said.

Schellack said stiff insurance premium hikes over the last couple of years had taken time to trickle down to some tenants. "It's somewhat divided. Some owners suck it up, and that's fine. Others will try to pass it on in rent rises."

Andrew King, executive officer of the New Zealand Property Investors' Federation, said that as the $99 annual levy worked out at about $2 a week, it wasn't an issue on its own.

Rates rises are needed to pay for Len Brown's transport plan

It was when it was added to other cost increases such as rates rises and higher insurance bills that the pressure got to landlords.

That pressure would vary depending on their financial positions, he said.

Newer landlords who were not yet breaking even on their properties would feel it the most as they would be paying some of the costs of owning the property out of their own incomes. "In those early days you are really having to fork out the money."

Landlords with properties in "middle class" suburbs were more likely to be able to lift rents. "Middle income up, there is a bit of room. The low income tenants are not in the same position. Their incomes have been going up pretty slowly, and they are struggling."

Landlords who lifted the rents on lower income households could see crowding in their properties increase, he said. Although landlords now frequently set limits in their contracts on the number of people who could live in their properties, those could be difficult to enforce.

Crockers marketing manager Kim Sinclair said other factors could play a part, such as how much a landlord liked a tenant, and how long a tenant had been in a home. Sinclair said rent rises at the point when one tenant moved out and another moved in tended to be higher than rent rises that took place during a tenancy.

"Some landlords will have tenants who have been there for the last five years and each time the property manager has said it is time to raise the rent, the landlord has said, 'no'," Sinclair said.

When landlords were invited to raise rents it was not uncommon for them to respond with comments along the lines: "I don't need to put the rent up. I like Jill. She's lovely and the gardens being kept very well."

Other landlords would be more focused on getting every dollar out of tenants that they could.

King was philosophical about the rates rises, saying Auckland's transport system did need improving. "For years the rates in Auckland were held low because the mayors didn't want to increase them because they would be voted out of office."

But the increased price of insurance and the "step change" in rates that had taken place under Len Brown's administration had led to the costs of owning property in Auckland rising far faster than inflation.

As yet there were no signs that the increased cost of owning a home was showing through in the prices people were willing to pay for properties.

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