The last few weeks The NZ Herald has been full of stories how the recent interest rate rises are affecting over-extended homeowners and investors and some are definitely bailing out of the market. We have experienced this first-hand last week when we put up our house for rental.

We put and ad up on Trademe (as you do) for a 2-bedroom house in Mt Albert. Within half a day we had several phone calls and managed to organise a couple of open homes for the people to come through and have a look. This surprised us quite a bit as we have rented another place the winter before and the phone calls for it where few and spread over several days. But this time, we literally had a rush of people wanting to move in asap. We weren’t prepared for this and although we did  manage to raise the rent a bit from the asking price I’m absolutely certain that we could have rented it for much more than the original rent we asked for. The house was rented in a day!

The interesting part - we heard the same story from several couples that came through: their landlord sold their rental property from under them to a first-home owner / occupier because of the interest rate rise and forced them to look for a new place. I’m not surprised there. As the interest-only loans came up for renewal on rates that were about 1-1.5 percent higher than their previous mortgage the property investment suddenly wasn’t only slightly cashflow-negative but it became completely unsustainable financially so they sell. Because of the high interest rates the only buyers around at the moment are people entering the housing market for the first time - buying for themselves. This leaves less properties for renters - simple supply and demand economics will dictate that rents must go up. From my experience  last week - this is going to be happening very soon.

Our second investment property is coming off its 12-month lease in December. This time we’ll be prepared for the rush - cannot wait to put the rents up!