The Reserve Bank has predicted that floating mortgage rates will rise to 7 or 8 percent over the next two or three years.
“This is a wake up call for rental property owners,” said Andrew King, Executive Officer of the NZ Property Investors’ Federation.
“It is likely that many have been taking a relaxed attitude to rental price increases because mortgage interest rates have been so low. They may find that they cannot increase their rents as much as they need to when the interest rate rises do hit.”
Higher interest rates mean higher costs for the property owner and these must be covered in order for the owner to stay in business. The NZ Property Investors’ Federation’s view is that slow and regular increases in rental prices are always better for owners and their tenants than large increases in rent.
It is currently $105 a week cheaper to rent the average New Zealand home than it is to own it. However statistics for October released yesterday show that booming migration will make home affordability even worse over the next few years even though the Reserve Bank’s LVR restrictions are dampening demand. This is the result of fewer people currently moving to Australia than has been the case in previous years.
“Statistics show that net immigration has been increasing for some months,” said Mr King, “and this will put pressure on the market for rental homes. This demand pressure and any increase in mortgage interest rates are together likely to result in higher rents. We recommend that residential property owners look ahead at the consequences of current trends and consider their options now”, said Mr King.
NZPIF Media release distributed 25 November 2013.