Sunday 20th of March 2005

Since Reserve Bank chief Alan Bollard increased the official cash rate by a quarter point to 6.75%, mortgage rates have followed suit. Floating rates now top 9%, and many fixed-rate loans are more than 8%.

Bollard has not ruled out further interest rate rises.

Real Estate Institute figures last week showed the national median house price reached a record in February, up from $265,000 in January to $269,200 last month.

In Auckland, the median house price rose 14.3% in the year to February, reaching $355,000.

But rents have not kept pace with soaring house prices. The REINZ figures show the median rental for a three-bedroom house in Auckland was $380 a week in February, 2.7% more than it was in February last year.

At those levels, Auckland rental property would produce a gross yield of 5.6%, down from 6.2% last year.

Rob Macdonald, director of property management firm Crockers, said the number of landlords with unreasonable rent income expectations had increased.

Crocker's figures show some rents are dropping, but other landlords, many facing rising mortgage costs, were unwilling to drop their rents.

However, in a market where tenants were generally spoilt for choice, other landlords were beginning to face the prospect of digging into their pockets to meet mortgage payments.

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