As reported in the NZ Herald on Wednesday 14th March, Auckland's rental crisis has intensified with the average weekly rent for a three-bedroom house jumping $55 in a month and rents in popular suburbs rising 25 percent in the last year.
The rule change a year ago stopping rental property owners claiming depreciation on their properties is one of the reasons for the rent rises. The landlords are out of pocket so naturally they raise their rents. In the end it is the tenant who ends up paying more. The increased rent payments for tenants means it will take them much longer to save a deposit for their first home. So the people who we want to encourage into home ownership are even more disadvantaged. Before the changes became law Treasury estimated that rents could rise by 1.5 per cent over three to four years because of the depreciation changes (NZ Herald 20/5/2010). My suspicion at the time that they were underestimating the impact on rent increases has been proven correct.
The ironic thing is the Government will earn very little from this rule change. Landlords have always had to pay back any depreciation they have claimed on their rental building when they sold their properties.
The information in this article was current at 27 Mar 2012