The residential property market appears to be turning back towards investors’ favour in most of Auckland and parts of the Wellington region.
Interest.co.nz’s Residential Investment Yield Indicator suggests the combined effects of falling house prices and rising rents are driving up rental returns in Auckland and parts of Wellington, making residential property relatively more attractive for investors.
The Indicator tracks the median rent for three bedroom houses in 56 locations around the country where there is a high level of rental activity, based on bond data from Tenancy Services, and combines that with lower quartile selling price data from the Real Estate Institute of New Zealand for three bedroom houses in the same locations.
That information is then used to provide an indicative gross rental yield for each of those 56 locations, allowing an apples-with-apples comparison of the relative attractiveness of investing in each of those areas, based on underlying rental returns. Actual returns will, however, vary depending on factors such as how much debt investors take on, the maintenance requirements of individual properties and vacancy levels.
The latest figures for the six months to the end of June show a particularly strong trend in Auckland, where rental yields were up in seven of the 10 suburbs tracked, unchanged in one and down in two, compared to the six months to the end of March.
That was driven by increases in median rents in eight of the 10 suburbs tracked (rents were unchanged in the other two), and declines in lower quartile selling prices in eight of the 10 suburbs.
The increase in rents was between $10 and $20 a week compared to the six months to March, which would have boosted landlords’ rental income.
At the same time, lower quartile selling prices were down noticeably.
For example in the Beachhaven/Birkdale district of Auckland’s North Shore, the median rent for a three bedroom house increased from $555 a week in the six months to March to $570 a week in the six months to June.
Over the same period the lower quartile selling price of three bedroom houses in the same area declined from $763,750 to $724,500.
That pushed the indicative gross rental yield for that area up from 3.8% to 4.1% over the same period.
The indicative yields rose by similar amounts in Torbay, Glen Eden, Massey, Henderson, Avondale, and Highland Park.
In Orewa/Whangaparaoa the indicative yield was unchanged at 4.2% because the median rent was unchanged at $570 a week, while the lower quartile selling price declined by less than $5000, which was not enough to move the yield.
Going against the trend, yields declined in Papakura from 5.1% to 4.8%, and in Pukekohe from 4.7% to 4.6%, largely on the back of rising lower quartile prices.
Other areas that showed strong trends were Taranaki/Whanganui, Hawke's Bay and Lower Hutt, where yields were uniformly down, driven by rising prices that outpaced increases in rents.
But those trends were reversed on the Kapiti Coast and in Upper Hutt, where rental growth and mostly softer prices pushed yields up.
However it remains to be seen whether the higher yields in Auckland will be enough to attract investors back into that market in serious numbers, especially with uncertainty in the sharemarket, a lack of capital gains in residential property and meagre term deposit rates.
At this stage the answer is probably not.
Although the latest indicative yields paint an improving picture for property investment in Auckland, the indicative yields are still only in the 3.8% to 5.1% range and mostly under 5%, which probably won’t get people too excited.
And many will be worried that prices could fall further.
Yields aren’t a lot higher in the Waikato and Bay of Plenty and most of Wellington, where there is also high tenant demand for rental properties. However it may be a different story if the trend continues.
With interest rates at historic lows and likely to fall further and capital gains receding, investors will be keeping a close eye on yields as they weigh up their investment options.
The table below shows the changes in indicative rental yields in all 56 locations monitored between June 2017 and June 2019. The full Rental Yield Indicator table, showing indicative yields going back to the six months ended September 2014, is available here.
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 Indicative gross rental yields for three bedroom houses in 56 selected areas with high rental activity during the previous six months. Based on REINZ lower quartile selling prices and median rents recorded by Tenancy Services' Bonds Centre in each area over the previous six months. |
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| Indicative gross residential rental yields for the six months ending: | ||||||
| Town/region | Yield % June 2019 |
Yield % March 2019 |
Yield % Dec 2018 |
Yield % Sept 2018 |
Yield % June 2018 |
Yield % June 2017 |
| Whangarei: | ||||||
| Kamo/Tikipunga/Kensington | 5.3 | 5.3 | 5.5 | 5.5 | 5.5 | 5.5 |
| Rodney - Orewa/Whangaparaoa | 4.2 | 4.2 | 4.1 | 3.9 | 4.0 | 4.0 |
| North Shore: | ||||||
| Beach Haven/Birkdale | 4.1 | 3.8 | 3.8 | 3.9 | 3.9 | 3.8 |
| Torbay | 4.0 | 3.8 | 3.9 | 3.9 | 3.7 | 3.6 |
| Waitakere: | ||||||
| Glen Eden | 4.3 | 4.0 | 4.1 | 4.1 | 3.9 | 3.9 |
| Massey/Royal Heights | 4.3 | 4.0 | 4.0 | 4.0 | 4.2 | 3.8 |
| Henderson | 4.4 | 4.1 | 4.2 | 4.1 | 4.1 | 4.0 |
| Central Auckland: | ||||||
| Avondale | 4.2 | 3.9 | 3.9 | 4.1 | 4.0 | 3.5 |
| Manukau: | ||||||
| Highland Park | 3.8 | 3.4 | 3.3 | 3.3 | 3.6 | 3.6 |
| Papakura/Drury/Karaka | 4.8 | 5.1 | 5.0 | 4.9 | 4.7 | 4.3 |
| Franklin - Pukekohe/Tuakau | 4.6 | 4.7 | 4.6 | 4.5 | 4.6 | 4.8 |
| Hamilton: | ||||||
| Deanwell/Melville/Fitzroy | 5.0 | 4.9 | 4.9 | 5.1 | 5.1 | 4.8 |
| Fairfield/Fairview Downs | 4.7 | 4.4 | 4.4 | 4.8 | 4.7 | 4.5 |
| Te Kowhai/St Andrews/Queenswood | 4.5 | 4.6 | 4.7 | 4.7 | 4.7 | 4.5 |
| Cambridge/Leamington | 4.4 | 4.4 | 4.5 | 4.6 | 4.6 | 4.4 |
| Te Awamutu | 4.9 | 4.9 | 4.9 | 5.1 | 5.0 | 5.1 |
| Tauranga: | ||||||
| Tauranga Central/Greerton | 4.8 | 5.5 | 5.1 | 4.9 | 4.8 | 4.7 |
| Bethlehem/Otumoetai | 4.2 | 3.7 | 4.0 | 4.2 | 4.2 | 4.0 |
| Mt Maunganui | 4.4 | 4.6 | 4.5 | 4.6 | 4.6 | 4.4 |
| Pyes Pa/Welcome Bay | 4.7 | 4.8 | 4.7 | 4.5 | 4.6 | 4.3 |
| Kaimai/Te Puke | 5.3 | 5.0 | 5.1 | 5.1 | 4.8 | 4.9 |
| Whakatane | 5.4 | 5.7 | 5.9 | 5.8 | 6.1 | 6.0 |
| Roturua: | ||||||
| Holdens Bay/Owhata/Ngapuna | 6.5 | 6.1 | 6.3 | 7.0 | 7.8 | 10.5 |
| Kuirau/Hillcrest/Glenholm | 6.0 | 4.9 | 4.9 | 5.5 | 5.4 | 5.5 |
| Ngongotaha/Pleasant Heights/Koutu | 6.0 | 6.1 | 6.5 | 6.7 | 6.0 | 6.2 |
| Hastings - Flaxmere | 7.9 | 8.2 | 8.3 | 8.4 | 9.2 | 9.3 |
| Napier - Taradale | 4.6 | 5.0 | 5.1 | 4.9 | 4.7 | 4.9 |
| Taranaki: | ||||||
| New Plymouth Central/Moturoa | 4.7 | 5.3 | 5.1 | 4.6 | 4.8 | 4.9 |
| Waitara/Inglewood | 6.7 | 7.6 | 7.4 | 6.6 | 6.5 | 7.2 |
| Whanganui | 7.8 | 8.1 | 8.2 | 8.5 | 9.0 | 8.6 |
| Palmerston North: | ||||||
| Kelvin Grove/Roslyn | 5.7 | 5.6 | 5.7 | 5.9 | 6.2 | 6.5 |
| Palmerston North Central | 5.3 | 5.3 | 5.2 | 5.1 | 5.1 | 6.0 |
| Takaro/Cloverlea/Milson | 5.6 | 5.6 | 5.7 | 5.8 | 6.1 | 6.2 |
| Kapiti Coast: | ||||||
| Paraparaumu/Raumati | 4.8 | 4.5 | 4.8 | 5.2 | 5.0 | 4.9 |
| Waikanae/Otaki | 4.7 | 4.5 | 4.4 | 4.5 | 4.5 | 4.7 |
| Upper Hutt: | ||||||
| Heretaunga/Silverstream | 5.1 | 4.9 | 5.0 | 4.9 | 4.9 | 4.7 |
| Totara Park/Maoribank/Te Marua | 5.3 | 5.2 | 5.3 | 5.6 | 5.6 | 5.8 |
| Lower Hutt: | ||||||
| Epuni/Avalon | 4.8 | 5.2 | 5.1 | 4.5 | 4.7 | 4.9 |
| Taita/Naenae | 5.0 | 5.4 | 5.5 | 5.4 | 5.5 | 5.6 |
| Wainuiomata | 5.3 | 5.5 | 5.5 | 5.3 | 5.6 | 5.9 |
| Wellington: | ||||||
| Johnsonville/Newlands | 4.7 | 4.9 | 5.1 | 5.0 | 4.9 | 5.0 |
| Vogeltown/Berhampore/Newtown | 5.0 | 4.6 | 4.4 | 4.3 | 5.0 | 4.5 |
| Tasman: | ||||||
| Motueka | 4.2 | 4.3 | 4.4 | 4.3 | 4.2 | 4.4 |
| Richmond/Wakefield/Brightwater | 4.5 | 4.4 | 4.3 | 4.3 | 4.5 | 4.6 |
| Nelson - Stoke/Nayland/Tahunanui | 4.7 | 4.6 | 4.5 | 4.7 | 4.8 | 5.0 |
| Blenheim | 5.3 | 5.3 | 5.3 | 5.4 | 5.7 | 5.6 |
| Christchurch: | ||||||
| Hornby/Islington/Hei Hei | 5.8 | 5.9 | 5.8 | 6.0 | 5.9 | 5.6 |
| Riccarton | 5.9 | 5.2 | 5.1 | 5.6 | 5.6 | 4.7 |
| Woolston/Opawa | 6.4 | 6.5 | 7.1 | 7.2 | 7.4 | 6.0 |
| Ashburton | 5.7 | 5.8 | 6.3 | 6.3 | 5.2 | 7.0 |
| Timaru | 6.0 | 6.1 | 6.1 | 5.8 | 5.6 | 5.7 |
| Queenstown/Frankton/Arrowtown | 4.2 | 4.0 | 4.1 | 4.3 | 4.2 | 4.6 |
| Dunedin: | ||||||
| Kenmure/Mornington | 5.3 | 5.1 | 5.5 | 5.7 | 6.2 | 6.3 |
| Mosgiel | 5.3 | 5.2 | 5.3 | 5.5 | 5.8 | 5.4 |
| South Dunedin/St Kilda | 6.5 | 6.9 | 6.4 | 6.8 | 7.3 | 8.0 |
| Invercargill | 7.0 | 7.2 | 7.7 | 8.3 | 8.2 | 8.3 |
|
Source: Base data from REINZ / MBIE *Yield is a property's annual rent expressed as a percentage of its purchase price. The indicative yield figures in this table are gross, and are calculated from the REINZ's lower quartile selling price for three bedroom houses in each area during the previous 6 months, and the median rent for three bedroom houses calculated from new tenancy bonds received by the Ministry of Business Innovation and Employment for the same areas/period. This gives an indication of the gross rental yield that would have been achieved in each area if a three bedroom house was purchased at the lower quarter price and rented at the median rent for that area. |
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37 Comments
Great news for some! But I guess like a rubber band, you can only stretch so far. The looming GFC may be the beginning of a clean slate.
GFC in the GC eh bro
Yo, yeah bro, GC gets more sun than Auckland, Welly, Palmy North and CHCH combined
Please don't remind me. Cold and wet here today.
You can have some of mine.. traipsing round berlin in 33 degrees.. lucky the beer is cheap cold, and good.. unlike most Auckland rentals.
Hamilton gets more fun than those places :)
Prices are falling? Ive been told thats impossible, queue the vested interest brigade...
An unexpected outbreak of sanity?
If a Landlord has bought at the peak, 60% LVR on interest only and the value of their rental property drops 10% has their yield improved?
Yep, but their equity has fallen.
Interesting. Personally, i would calculate my yield off the capital I have put in to my investment property (purchase price).
I.e. If i pay $1 million for a property, then the return I generate on that property is the yield as a percentage of $1 million. If the value of the house halves, that doesn't change the fact that I've put $1 million in.
Not a great way to do it.
It should be off current market valuation, otherwise you can't objectively compare between investments on the basis of opportunity cost.
NZ Dan, of course the yield doesn't improve if the value drops after you buy a house or other investment lol your money has been spent, that's a fixed figure
Only way to increase the yield is to increase the rent
bludge, bludge from hard working Kiwis.... I wish I was you?
Put it this way: 6m ago, Millwater median was never changing for a 4 bed at $1.18m
Now you can get 5 beds for $1.050m
Red Beach same, for 5 beds.
Due to so many people pulling stuff off market, choice is down for specific product
Agents are "having the conversation" re lowering asking prices with vendors, earlier and in more direct fashion.
So the Housing price is falling in NZ.
Oh ! That is a Breaking News
Ask all thos so called Investors (Speculators) who have bought in last few years and now with falling market have lost 10% of their deposit. and still chances of going down further.
Good news for FHB or genuine investors who waited (May be by default) and even now are not rushing to get best deal.
"The residential property market appears to be turning back towards investors’ favour in most of Auckland and parts of the Wellington region."
Definitely not. Falling prices and falling top end rents.
Spoke with a mortgage broker two days ago. Now their estimate is 20% investors (who are refinancing not buying), and falling, 80% owner occupier borrowers. Two years ago this was 50% for each group.
Now we have steady price declines all over Auckland many folks who bought since 2016 are under water.
Investors want a rising market and favourable tax regime. Now they have neither.
That is what i'd expect. Most of the "investors" who jumped on the bandwagon late were in it for the capital gains. Had a chat to a person with a single rental property the other day and they didn't even understand the yield on their property.
Particularly in Auckland net yields will need to rise a lot more to get property investors buying again. Who would accept a net 2%~ yield when the value of the property is falling at 4% yoy?
Joe Wilkes was slamming Whanganui rental stock the other day but 7.8% yield about the best in the country.
Shame he isn't around to reply personally.
Thing about rental yields in areas outside of main cities is that they are usually higher ~ and for a reason.
Places often take longer to sell and because W is a slightly more economically challenged area than say Auckland you would expect more issues re late payments etc.
Risk, liquidity and reward innit.
Agree Glitz
Investing in rental property is not just buying any property.
One needs to carefully consider what niche one is interested in.
When I was working - i.e. didn't want too many hassles - a low maintenance 2-3 house suited to a working professional recently married couple was ideal. Never had any issues with rent payments (nor parties,care of house etc) for such properties - the only downside which wasn't a biggie was that tended to stay only 18 months or so before they bought their own home or had babies.
Solo parent was also quite a good tenant - benefit assured, rent direct credited, and inclined to stay longer.
Always had an excellent relationship with my tenants and never had to go to Tenancy Tribunal. No doubt one could chase the higher yields but the hassle and extra work didn't really seem worth the potential troubles.
Tokoroa, if you bought a block of flats you can get nearer to 10% returns.. But then you have to deal with motorcycle club members
DGM have taken a particularly hard thumping today.......
No wonder they’re getting all snarky.
TTP
Over the past ten years gross national rental income (based on the median rent ) has risen 89 percent from 7.46 Billion to 14.1 Billion , a reflection of increased rents and an additional, quite remarkable net 122000 households now renting. Ironically , the median household income which has risen 34 percent during the same period is supported by the increase in rental income. There can be no more telling statistic, than over those same ten years, the ratio of households in rental accommodation to those in owner occupied has increased at a ratio of 3:1.
Prices are still going strong in Pukehina, near Tauranga. This house had an RV of $775k in 2014. Now its for sale for $1.43 million. Maybe the doomsdayers are wrong and house prices are not really going to drop afterall?
https://homes.co.nz/address/pukehina/139-pukehina-parade/YPG2n
Sitting directly in the firing line when the inevitable Tsunami hits (whether from Chile or southern Kermadec Trench)
ummm it doesn't take much of a storm to clear out it's own beach. We are getting more and more storm these days with climate change. 1.43 mil well spent? not for me..!
Pukehina "Eco Village" going in near there. Shaping up to be a cluster of very exclusing and expensive batches
https://www.westernbay.govt.nz/repository/libraries/id:25p4fe6mo17q9stw…
Scroll down to attachment A for Pukehina. The red line shows council predicted 0-50 year coastline. The light blue line shows council predicted 50-100 year coastline. Hopefully these predictions are vastly overstated but if they are not then I fear for any new residents paying these very high prices.
https://www.westernbay.govt.nz/repository/libraries/id:25p4fe6mo17q9stw…
Given the information is already out there and caveat emptor applies, you can rest assured whoever buys it will stand on their own and not demand taxpayers pay for their property to be protected.
Just kidding, of course.
Would never buy a property that wasn’t positively geared and had no upside!
Lowest return we are getting on purchase price is over 6% and we average close to 10% with returns upto 15% on purchase.
Professional long term landlords are not speculative!
P lab is pretty popular in your neck of the wood.. that's an up side, extra income or you dob in your tenants!
Chairman, not in our neck of the woods at all.
If you are not professional then it could happen!!
Sad and ignorant post CM, you're better than that
I can't say this reflects what I'm seeing out here. Our LL put the rent up $25 a week about four months ago (first time in 3 years, fair enough), but when I look out into the market now (Hibiscus Coast area) rents are very much down and there is a *lot* more available out here for rent.
I accept that it softens off a bit over winter, but I think these figures have a lag built in. Landlords will always demand the maximum they can (fair enough, it's their asset, I do the same), and there's been a track up for a while, probably partly due to the obligations on LLs to improve conditions and so on, but mostly IMO because of supply and demand—good rentals have been very hard to come by. But literally in the last couple of months I've been noticing more and more pretty decent homes coming up for rent, at reasonable (okay, reasonable-ish) prices. How can that be? Is it that people who can't sell their overpriced homes in this market are putting them out for rent instead?
Surprising TBH—maybe it won't last beyond the winter, but when the GFC occurred in the USA, rents tanked too; rents on all my properties out there dropped about 10% and then stayed static for about four years once the house prices really started declining. I wonder if we'll see this here.
Rents are not down in ChCh and there continues to be more and more houses being built.
We do not have leases expiring in the middle of Winter, we work on the end of January or Spring at worst, although if we buy in Winter we need to obviously.
Haven’t had any problem getting people to apply but you need to weed out the good from the less than average.
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