Fears of rental accommodation scarcity as a third of landlords contemplate selling up

There are fears rental accommodation could become scarce with a survey showing a third of landlords are thinking of selling up.

Tax changes, rising interest rates and costs related to the healthy home standards have already seen some investors exit the market.

A dozen central Auckland apartments are up for sale at bargain prices because the overseas owner is pulling out.

"For a lot of our landlord or investor clients, the cost of compliance for Healthy Homes, cost of mortgages are all going up so it's putting a lot of financial pressure on a lot of people out there. That's why we see sales like this, with multiple properties going to market at the same time," said Scott Dunn, sales manager at City Sales.

Dunn is selling the portfolio on the owner's behalf - a trend he says is growing.

"We have phone calls with people saying, 'I just don't want to be a landlord anymore'," he said.

It's a similar situation for one Palmerston North-based owner of investment properties.

"It's an investment, right? So we're wanting to make some benefit off it and with this interest deductibility rule and tenancy law, it's become quite difficult to be a landlord," said landlord Aveen Mitra.

Many landlords are struggling with the Government's decision to phase out interest deductibility.

Previously, 100 percent of interest could be claimed as an expense by residential landlords but it's being incrementally phased out over five years until eventually they won't be able to do it at all. There is an exemption though for new builds.

A recent survey of property investors showed 32 percent were contemplating selling their rental properties because of that tax change.

The Auckland Property Investors Association is worried rental accommodation could become scarce if too many landlords exit the market.

"If we see a decrease in the number of landlords who want to be one, we are certainly at a big risk of losing that. Even if a small percent - say 1 percent - leave, that's 5000 properties we're talking about," said president Kristin Sutherland.

On the flip side though, that could benefit first-home buyers.

"If the first-home buyer can withstand the high interest rates for a couple more years, then they should absolutely get into the market right now," Dunn advised.

But it's those who can't afford to buy a home who could be the biggest losers - as rental stock goes down and rents almost certainly go up.