Strong house price growth in the second half of last year continued to push down residential rental yields in most parts of New Zealand, according to interest.co.nz's Rental Yield Indicator.
Although rents also rose in most parts of the country, the growth in prices was generally stronger, which had the effect of pushing down the potential rental returns investors could receive on their investment.
The indicator measures property prices and rents over a six month period in 54 locations around NZ and comperes the resulting yield figures quarterly.
The latest figures show property prices over the six months to December last year were up in 47 of the 54 locations, compared to the six months to the end of September last year.
Rents were up in 42 locations, down in three locations and unchanged in nine.
In general, price growth outpaced rent growth in the majority of locations, which meant areas where yields declined outnumbered those where yields rose by almost three to one.
Yields are now at their lowest level since interest.co.nz began calculating them over the six months to September 2014.
Across the 54 locations monitored, gross indicative yields ranged from 2.8% in Torbay on Auckland's North Shore, to 5.6% in the Rotorua suburb of Owhata.
Only three of the 54 locations monitored had yields of 5% or more.
Three years ago, over the six months to December 2018, the gross indicative yields ranged from 3.3% to 8.3%, with 31 locations having yields of 5% or greater.
Yields allow an apples-with-apples comparison to be made of the income earning potential of properties in different locations around the country, but they are based on buying a property at current prices and renting at current rents.
They show that buying a residential rental property has become relatively less attractive over the last few years because the rental returns would have been decreasing.
However investors who have owned rental properties for several years would be unlikely to be concerned because they would probably have seen increases in both the capital value and the rental income of their properties.
And because interest rates have been low, its likely many would have had a significant improvement in their cash flows.
That is probably why we have not seen a mass exodus of investors from the residential property market, even though tax rules for rental properties are no longer as favourable as they used to be.
An abridged version of the Rental Yield Indicator table, going back to 2014, is shown below. A complete version of the table, showing all quarterly figures, is available here.
The comment stream on this story is now closed.
 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: | |||||||||||||||
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Town/region
|
Yield Dec 2021 | Yield Sep 2021 | Yield Jun 2021 | Yield Mar 2021 | Yield Dec 2020 | Series break* | Yield Sep 2020 | Yield Jun 2020 | Yield Mar 2020 | Yield Dec 2019 | Yield Dec 2018 | Yield Dec 2017 | Yield Dec 2016 | Yield Dec 2015 | Yield Dec 2014 |
| Whangarei: | |||||||||||||||
| Kamo | 4.6 | 5.1 | 4.9 | 5.2 | 5.6 | --- | 5.4 | 5.2 | 5.3 | 5.4 | 5.5 | 5.5 | 5.4 | 5.6 | 7.6 |
| Rodney - Orewa | 3.7 | 3.6 | 3.8 | 4.1 | 4.4 | --- | 4.1 | 4.1 | 4.0 | 4.1 | 4.1 | 4.0 | 3.8 | 4.1 | 4.6 |
| North Shore: | |||||||||||||||
| Beach Haven | 3.1 | 3.5 | 3.4 | 3.4 | 3.9 | --- | 3.8 | 3.8 | 3.9 | 4.1 | 3.8 | 3.8 | 3.7 | 3.8 | 4.3 |
| Torbay | 2.8 | 3.3 | 3.4 | 3.4 | 3.8 | --- | 3.7 | 3.8 | 3.9 | 3.9 | 3.9 | 3.6 | 3.6 | 3.6 | 4.6 |
| Waitakere: | |||||||||||||||
| Glen Eden | 3.4 | 3.5 | 3.6 | 3.7 | 4.1 | --- | 4.1 | 4.1 | 4.0 | 4.2 | 4.1 | 3.9 | 3.8 | 4.0 | 4.9 |
| Massey | 3.3 | 3.4 | 3.5 | 3.7 | 4.1 | --- | 4.1 | 4.1 | 4.2 | 4.3 | 4.0 | 3.9 | 3.9 | 4.0 | 4.9 |
| Henderson | 3.3 | 3.4 | 3.6 | 3.8 | 3.9 | --- | 3.9 | 4.0 | 4.3 | 4.4 | 4.2 | 4.1 | 3.8 | 4.1 | 4.9 |
| Central Auckland: | |||||||||||||||
| Avondale | 2.9 | 2.8 | 3.2 | 3.4 | 3.8 | --- | 3.8 | 3.5 | 3.7 | 4.2 | 3.9 | 3.6 | 3.6 | 3.7 | 4.4 |
| Manukau: | |||||||||||||||
| Highland Park | 2.9 | 3.1 | 3.0 | 2.8 | 3.6 | --- | 3.6 | 3.6 | 3.4 | 3.4 | 3.3 | 3.6 | 3.5 | 3.6 | 4.1 |
| Papakura | 3.8 | 4.2 | 4.4 | 4.4 | 4.6 | --- | 4.5 | 4.6 | 4.6 | 4.7 | 5.0 | 4.7 | 4.4 | 4.8 | 5.9 |
| Franklin - Pukekohe | 4.1 | 4.4 | 4.4 | 4.4 | 4.7 | --- | 4.6 | 4.6 | 4.5 | 4.4 | 4.6 | 4.7 | 4.4 | 5.0 | 5.6 |
| Hamilton: | |||||||||||||||
| Melville | 3.9 | 4.0 | 4.2 | 4.1 | 4.7 | --- | 4.9 | 4.6 | 4.7 | 4.9 | 4.9 | 4.9 | 5.0 | 5.5 | 6.9 |
| Fairfield | 3.7 | 4.0 | 4.1 | 4.2 | 5.1 | --- | 4.9 | 4.9 | 4.9 | 4.8 | 4.4 | 4.6 | 4.8 | 5.7 | 6.2 |
| St Andrews | 3.5 | 3.8 | 3.8 | 3.8 | 4.2 | --- | 4.2 | 4.3 | 4.2 | 4.3 | 4.7 | 4.6 | 4.3 | 4.9 | 5.6 |
| Cambridge - Leamington | 3.7 | 3.9 | 3.9 | 4.0 | 4.5 | --- | 4.4 | 4.3 | 4.4 | 4.3 | 4.5 | 4.2 | 4.6 | 5.3 | 5.6 |
| Te Awamutu | 4.2 | 4.3 | 4.4 | 5.2 | 4.8 | --- | 4.7 | 4.3 | 4.9 | 5.1 | 4.9 | 5.1 | 5.1 | 6.2 | 6.3 |
| Tauranga: | |||||||||||||||
| Greerton | 4.2 | 4.2 | 4.1 | 4.3 | 4.7 | --- | 4.4 | 4.7 | 4.6 | 4.6 | 5.1 | 4.8 | 4.4 | 5.2 | 5.9 |
| Bethlehem | 3.5 | 3.7 | 3.7 | 4.0 | 4.4 | --- | 4.1 | 4.4 | 4.2 | 4.1 | 4.0 | 4.3 | 3.7 | 4.8 | 5.3 |
| Mt Maunganui | 3.4 | 3.6 | 3.6 | 3.8 | 4.1 | --- | 4.1 | 4.3 | 4.3 | 4.1 | 4.5 | 4.2 | 4.2 | 4.6 | 5.6 |
| Pyes Pa | 3.7 | 4.2 | 4.2 | 4.4 | 4.9 | --- | 4.6 | 4.5 | 4.5 | 4.7 | 4.7 | 4.6 | 4.8 | 5.5 | 5.7 |
| Te Puke | 3.8 | 4.0 | 4.3 | 4.7 | 4.7 | --- | 4.6 | 4.8 | 5.1 | 5.3 | 5.1 | 5.5 | 5.4 | 5.9 | 6.2 |
| Whakatane | 4.5 | 4.7 | 4.3 | 4.3 | 5.3 | --- | 5.2 | 5.3 | 5.2 | 5.5 | 5.9 | 6.0 | 5.8 | 7.1 | 6.7 |
| Rotorua: | |||||||||||||||
| Owhata | 5.6 | 5.5 | 5.9 | 5.8 | 7.0 | --- | 6.7 | 6.7 | 6.8 | 6.3 | 6.3 | 7.4 | 9.7 | 8.3 | n.a. |
| Glenholme | 4.6 | 4.6 | 5.3 | 5.0 | 5.1 | --- | 5.1 | 5.8 | 4.9 | 4.9 | 4.9 | 4.9 | 7.3 | 6.3 | n.a. |
| Ngongotaha | 4.9 | 4.9 | 5.2 | 5.8 | 6.9 | --- | 6.6 | 6.2 | 6.0 | 5.9 | 6.5 | 7.6 | 8.2 | 8.0 | n.a. |
| Hastings - Flaxmere | 4.8 | 4.5 | 5.1 | 5.2 | 6.1 | --- | 6.0 | 5.9 | 6.1 | 6.3 | 8.3 | 9.8 | 8.6 | 11.5 | 11.7 |
| Napier - Taradale | 4.0 | 3.9 | 3.7 | 3.7 | 4.6 | --- | 4.5 | 4.3 | 4.3 | 4.7 | 5.1 | 4.4 | 4.9 | 5.6 | 6.3 |
| Taranaki: | |||||||||||||||
| New Plymouth | 4.4 | 4.3 | 4.6 | 4.6 | 4.9 | --- | 4.6 | 5.0 | 4.6 | 5.4 | 5.1 | 4.7 | 5.3 | 5.4 | n.a. |
| Waitara | 4.4 | 4.8 | 5.3 | 5.5 | 5.7 | --- | 6.0 | 7.0 | 6.3 | 6.3 | 7.4 | 6.1 | 7.0 | 8.9 | n.a. |
| Whanganui | 5.1 | 5.6 | 5.8 | 5.7 | 6.6 | --- | 6.2 | 6.8 | 7.0 | 7.4 | 8.2 | 8.9 | 9.7 | 10.0 | n.a. |
| Palmerston North: | |||||||||||||||
| Kelvin Grove | 4.4 | 4.5 | 4.4 | 4.3 | 5.5 | --- | 5.3 | 5.3 | 5.4 | 5.2 | 5.7 | 6.5 | 6.6 | 7.2 | n.a. |
| Palmerston North Central | 3.8 | 3.8 | 4.0 | 4.3 | 5.1 | --- | 4.7 | 4.4 | 4.9 | 4.7 | 5.2 | 4.9 | 5.6 | 5.5 | n.a. |
| Takaro | 4.3 | 4.2 | 4.3 | 4.5 | 5.2 | --- | 5.1 | 5.1 | 5.1 | 5.2 | 5.7 | 5.9 | 6.3 | 7.1 | n.a. |
| Kapiti Coast: | |||||||||||||||
| Paraparaumu | 3.7 | 3.8 | 3.5 | 3.7 | 4.3 | --- | 4.3 | 4.6 | 4.5 | 4.5 | 4.8 | 5.0 | 5.3 | 6.0 | 6.1 |
| Waikanae | 4.4 | 4.4 | 4.1 | 4.0 | 4.9 | --- | 4.3 | 4.2 | 4.3 | 4.5 | 4.4 | 5.2 | 5.5 | 6.5 | 5.5 |
| Upper Hutt: | |||||||||||||||
| Silverstream | 3.3 | 3.4 | 4.0 | 4.2 | 4.1 | --- | 4.3 | 4,7 | 4.7 | 5.2 | 5.0 | 5.0 | 4.6 | 5.8 | n.a. |
| Totara Park | 4.3 | 4.3 | 4.2 | 4.2 | 4.8 | --- | 4.6 | 5.0 | 5.3 | 5.0 | 5.3 | 5.6 | 5.2 | 6.2 | n.a. |
| Lower Hutt: | |||||||||||||||
| Avalon | 3.9 | 3.4 | 3.6 | 3.8 | 4.6 | --- | 4.6 | 4.7 | 4.4 | 4.7 | 5.1 | 4.5 | 5.6 | 5.2 | n.a. |
| Naenae | 3.9 | 4.0 | 3.9 | 4.3 | 5.0 | --- | 4.9 | 4.9 | 4.9 | 5.3 | 5.5 | 5.9 | 6.1 | 6.9 | n.a. |
| Wainuiomata | 4.2 | 4.2 | 4.2 | 4.2 | 5.1 | --- | 5.0 | 5.0 | 5.0 | 5.1 | 5.5 | 5.6 | 6.3 | 7.7 | n.a. |
| Wellington: | |||||||||||||||
| Johnsonville | 3.8 | 3.6 | 3.6 | 4.1 | 4.4 | --- | 4.4 | 4.7 | 5.0 | 4.7 | 5.1 | 4.6 | 4.8 | 5.4 | 5.5 |
| Newtown | 3.4 | 4.1 | 3.9 | 4.1 | 5.7 | --- | 5.3 | 4.4 | 4.3 | 5.0 | 4.4 | 4.3 | 4.1 | 5.2 | 5.2 |
| Tasman: | |||||||||||||||
| Motueka | 3.8 | 4.0 | 3.9 | 4.0 | 4.6 | --- | 4.0 | 3.9 | 4.3 | 4.0 | 4.4 | 4.5 | 4.0 | 5.4 | 5.6 |
| Richmond | 3.8 | 3.8 | 3.9 | 4.1 | 4.3 | --- | 4.2 | 4.3 | 4.3 | 4.3 | 4.3 | 4.6 | 4.6 | 5.3 | 5.8 |
| Nelson - Stoke | 3.8 | 4.0 | 4.1 | 4.3 | 4.6 | --- | 4.5 | 4,6 | 4.5 | 4.7 | 4.5 | 4.9 | 5.1 | 5.7 | 5.7 |
| Blenheim | 4.8 | 4.6 | 4.5 | 5.1 | 5.8 | --- | 5.5 | 5.2 | 5.1 | 5.6 | 5.3 | 5.5 | 6.3 | 7.0 | 6.6 |
| Christchurch: | |||||||||||||||
| Hornby | 4.2 | 4.7 | 5.0 | 5.1 | 5.6 | --- | 5.7 | 5.8 | 5.9 | 5.8 | 5.8 | 5.8 | 5.7 | 6.0 | 6.5 |
| Riccarton | 3.7 | 3.8 | 3.9 | 3.7 | 4.7 | --- | 4.9 | 5.2 | 4.4 | 4.3 | 5.1 | 5.7 | 5.2 | 5.0 | 4.9 |
| Woolston | 4.5 | 5.2 | 5.1 | 5.5 | 5.7 | --- | 5.8 | 6.1 | 6.3 | 6.6 | 7.1 | 6.7 | 6.5 | 6.4 | 7.2 |
| Ashburton | 4.7 | 5.9 | 5.5 | 4.7 | 6.3 | --- | 5.8 | 5.5 | 7.3 | 7.5 | 6.3 | 5.8 | 8.4 | 7.0 | 6.7 |
| Timaru | N/A | 5.0 | N/A | 5.4 | 5.4 | --- | 5.5 | 5.6 | 5.6 | 5.7 | 6.1 | 6.2 | 5.9 | 6.4 | 6.7 |
| Queenstown | 3.1 | 3.3 | 3.1 | 3.2 | 3.3 | --- | 3.6 | 4.0 | 4.0 | 3.7 | 4.1 | 4.3 | 4.1 | 5.2 | 4.7 |
| Dunedin: | |||||||||||||||
| Mornington | 4.5 | 4.1 | 3.8 | 4.6 | 5.6 | --- | 5.3 | 4.8 | 4.6 | 4.7 | 5.5 | 5.4 | 6.5 | 7.1 | n.a. |
| Mosgiel | 4.2 | 4.1 | 4.2 | 4.3 | 4.6 | --- | 4.6 | 4.7 | 4.8 | 5.0 | 5.3 | 5.4 | 5.7 | 6.4 | n.a. |
| St Kilda | 5.4 | 5.6 | 5.8 | 6.3 | 6.3 | --- | 6.1 | 5.5 | 5.4 | 5.7 | 6.4 | 7.6 | 7.5 | 8.0 | n.a. |
| Invercargill | N/A | 5.6 | N/A | 5.6 | 6.6 | --- | 6.7 | 6.6 | 6.6 | 6.7 | 7.7 | 7.9 | 7.9 | 9.1 | 9.2 |
|
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 that type of property in that area. *Series break note: In November 2020 Tenancy Services changed the geographical boundaries of many of the suburb groupings it uses to collate the bond data from which it calculates median rents. This is likely to have affected the median rent figures used in the indicative yield calculations displayed in the above table. For this reason, the indicative yield figures from December 2020 onwards should not be compared with those prior to December 2020, because any comparison may not be on an apples-with-apples basis. |
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138 Comments
Be quick! Buy now to get awesome yields and strong capital gain!
Indeed. Yields were already poor. Very poor. With the cost of debt increasing, will we see the price of the renewal of debt being less than the cost of the rent?
There's absolutely no rational reason to buy rental property right now. Unless you can manage to land an absolute bargain (say 25-30% lower than peak late 2021 value).
Equivalent to an early 2021 buying price yet with a higher interest rate. My, the thinking has changed
Well, a 30% lower price would be equivalent to a 2018/2019 price wouldn't it.
Certainly not. House prices lifted around 35 percent in 2021. It is simple math though not so simple for those who dont know.
Beware calling out dubious maths, a rise of 50% followed by a drop of 33% gets a house back to its original value
Go back to primary school pal.
You just embarrassed yourself.
Nasty comment but at least I went to primary school, while you were held back at kindy.
My math tells me Value plus 35 percent less 25 percent is still ahead. Oh well sir your math tells you to look forward to being underwater on what you paid :)
Haha, wow!
In fact it was your first comment to me that was nasty -
'It is simple math though not so simple for those who don't know' - .
and embarrassingly wrong on the math.
This sums up the typical mindset / intelligence of property investors.
Well, a 30% lower price would be equivalent to a 2018/2019 price wouldn't it.
No it wouldnt... do I have to walk you through it? Over 2020 and 2021 the hpi increased approx 50 percent overall. As Yvil noted above it would take a 33 percent fall to return to the original value at beginning of 2020. Your gloomiest "30 percent lower price" still would not be enough to come back to 2018/2019. I have no idea apart from one-eyed bias, how you arrived with "equivalent to a 2018/2019 price". That also being a long span of 2 years a lot happened including rising values towards the end of 2019 when the market started to catch on fire before anyone had heard of covid. Presumably it all makes sense to you somewhere in the void of yours. Btw if you take everything personally I doubt that you have got very far.
Your comment at 2.04pm, and as Yvil alluded to, showed you got the math fundamentally wrong, and now you're attacking me for pointing that out (Yvil pointed it out too)
Have a look at page 5 of this report:
https://www.reinz.co.nz/Media/Default/Statistic%20Documents/2022/Reside…
Auckland's HPI was basically flat through all of 2017 through to late 2019.
And then from late 2019 to late 2021 it increased by about 45-50%.
A 30% fall from the peak of late 2021 prices brings it back CLOSE to a price around that in 2017.
So if the value of your investment property falls circa 30% it will be back close to its 2017 value. Are you worried?
My original point was not to have a go at investors, it was rather to say FHBs might consider the option of buying if they can buy at prices 20-30% lower than late last year's peak. So let's be positive for FHBs, there could be some opportunity this year. That's a good thing isn't it?
Your comment at 2.04pm, and as Yvil alluded to, showed you got the math fundamentally wrong, and now you're attacking me for pointing that out (Yvil pointed it out too)
Can you not count, read or think? Nope. Lucky you saved a deposit (or possibly bank of mum /dad and used the funds of your parents) and got a first house in 2019 that is about the only thing you have got right
buy at prices 20-30% lower
Vs
absolute bargain (say 25-30% lower
Are you displaying someone undecided or someone who cannot remember what he she said not that much earlier. I know this is not the first time that you have been picked up for conflicting statements
Clearly you thought your argument was complete because you thought a 35% rise was greater than a 30% fall in nominal terms which as Yvil points out is bad math and incorrect, and then you casually insulted HM. People often get the math on that confused. Let it go.
Haha he is really riled up isn't he, he's lost it!
Because he knows his math was hopelessly askew to begin with and now he's picking over little bits of intentional generality in what I said.
Anyway, it's beer o'clock! He was an easy property investor to troll (something I hardly ever do)
Yes, used parent(s) money and cannot bear to admit.
He's been trolled many times before and lashed out and got himself banned, thats why he's on username number 5 or 6, if he is who I think he is.
You pulled that assumption out of your ar5e. My numbers speak for themselves.
Let's stop arguing team... and instead all just agree that the correction will be greater than 30% when this is over...
Over time, rental yield plus capital appreciation from property has proven to be outstanding…….
Not much else comes close.
TTP
Take away the piss-taking rort of tax-free gains. Is it still the best game in town? Must be a pretty close-run thing given how much bitching we hear from investors when they're asked to make sure their properties comply with some sort of minimum standard that isn't 'slum'.
I don't deny that historically, up to this point, that has been true.
However moving forward from here, buying from now, will it be anywhere near as good? I don't think it will. Not even close.
Tim, how many times have the wise told you to stop driving whilst gazing out the rear window!
Nice Burn... his car at least is moving forward whilst your pony has been put down out of "kindness"
TTP
Don’t ruin the false glee of the DGM on this site.
I shouldn’t ruin this false glee but . . .
Even those landlords who purchased in any of the “31 locations with yields over 5%” three years ago now with rent increases will be now have higher yields on their initial investment . . . and I shouldn’t mention the paper capital gains of 40% which due to leveraging will be in excess of 150% on their initial investment (exempt the brightline if they hold it for another couple of years). What really upsets these renter DGM are they are also paying down the landlord’s mortgage and not their own.
What most on this site don’t understand is that property by its nature is long term and that the short term fluctuations are irrelevant. Same house, same (likely increasing) rent. Those investors buying at the moment will be looking at the long term and will be considering current yield - the flippers will most likely be either gone or having to search a little harder.
I find it amusing that many of these young guns are right into Bitcoin and excuse any fall as simply volatility and huge capital gains will befall them in the future - high risk based on hope and not.backed up with any real asset. Long term property investment is considerably less risky and far more sure.
But all this is beyond them. :)
Pinter8, (sigh) how many times have the wise told you to stop driving whilst gazing out the rear window?
Paper gains, unless realised, are just flush prone toilet paper especially if you're foolish enough to boast....
Retired Poppy
“The wise” . . . that is really rich coming from you.
Some years ago you were strongly advising FHB to hold off buying and put their money in term deposits - as house prices continued to rise and term deposit fall.
The only wise thing I have seen you do is to disappear from this site in shame for the past few years.
Yes, paper gains are not realised until realised . . . but you don’t seem to be able to acknowledge so are paper losses. Do I need to repeat a previous post of mine: purchased a property 2006, RV 2009 was below purchase price, sold 2016 for considerable profit. You are one of those who can’t get their head around property being long term.
You also can’t get your head around two other key points. Firstly, for a FHB a house is a home, and secondly a fundamental tenant of financial investment is don’t try to time the market. Your inability to see these key points would have cost FHB many hundreds of thousands.
Happy that your advice was abysmal?
Ouch! a little touchy as expected given the times...
Childish reply. It's also very poor of you to disappear from the comments section after giving terrible advice to FHB a few years ago, being don't buy and then yo reappear years later, when it looks like the market is turning.
Why don't you man up, admit that your repeated advice was terrible and that FHB who listened to you would have missed out on hundreds of thousands of $
..... and another who suffered separation anxiety at my short absence. I'm truly flattered - honestly :)
Crash Crusader (aka Retired-Poppy) only has himself to blame for the discrediting and disrepute he has earned himself.
Not only were his comments here misleading and deceptive - and his forecasts abysmally inaccurate/incompetent - but he continues refusing to accept responsibility for them.
He shows callous disregard for anyone who was influenced by him. It's just not cricket.
TTP
Would you care to be constructive? I have posed a question below as to the merit in considering new build townhouses as an investment.
I don't think they are generally good investments at all, but I come here to test my views and despite what you might think I like hearing different viewpoints even if I don't agree with them.
Still a childish reply and still no accountability for your mistakes RP
Is that because you took the advice and sold?
I have bought and sold several times in the last 2 years, certainly not because of RPs erroneous comments
But to be fair, I thought the reason you sold your Auckland house was because you thought the market was going to crash when covid first hit.
And that's not a criticism of you, pretty much everyone thought there was going to be a decent correction if not a crash.
So isn't it a bit of a contradiction to then call out RP for warning of a house price crash a couple of years back?
Wow - RP you appear to have triggered a few people today! Obviously things are getting a bit tough in the world of people farming and property debt speculation 😜
The more they attack, they more you can see where their fear and insecurity is (that is that you might actually be right).
Retired Poppy… he’s a knob. I’m glad to see you back. I like most peoples commentary on here, but sometimes you just get a knob, and he’s the biggest knob.
... yes, just another uncontented property loving human. Its the destination that matters most, not the road. Celebrate when your gains are banked peoples!
The destination for us all is death. I believe it's the journey that matters most,
This is very true.
A lifetime of debt servitude is a waste of the only lifetime one has.
Brock
So a lifetime paying rent and paying your landlord’s mortgage off while they take the capital gains is the better option?
I wish those currently renting and aspire to homeownership well and that they see Brock’s comments for what they are.
Another low grade comment.
Such limited perspective in life - only one or two ways of doing things.
People need to see certain member's drivel in the comments section for what it is.
BL is a doom merchant mate, your bang on. You either own or rent, I know what side of the fence I would rather be on
"A lifetime of debt servitude"
This is a really ignorant comment and a belief which will ensure you never own a house and struggle more in life. To have a roof over your head is not free, you can either take out a mortgage for 25 years and then own a freehold house or you can rent forever and never own anything
I agree.
Although I suspect Brock's comment was more about a life of debt servitude on an asset that is way overvalued and could fall in value.
Also, I would say that it's not much of a fun life if 50% of your net income is going on a mortgage and it means your life effectively becomes a miserable existence where you can't within moderation travel, wine, dine etc.
It's not at all ignorant at all. There is nothing wrong with buying a home when the prices are reasonable compared to incomes.
There is something wrong with the current situation in New Zealand and the extreme amounts of lifetime debt people are being saddled with.
There is nothing but the prospect of capital losses on the near term horizon. It would be prudent to buy when the numbers stack up better and people then have a chance to enjoy their life.
"rent forever and never own anything" now that's a totally ignorant comment born of elitism. Financial independence can also be a result of other achievements in life and may not nessasarily involve owning a home. For the time being I suggest by thinking outside the square you could encouragie others not to over mortgage their lives on overpriced houses. At the moment, you're advocating FHB commence gambling.
Over the last few years very few NZers - if any - would have achieved “financial independence” from the returns on their term deposits.
Yet, Crash Crusader strongly advocated term deposits - until his advice became a joke here…….
Not being able to face the music any longer, he then disappeared abruptly from this site for a lengthy period.
He returned recently but continues to avoid being accountable for his deplorable advice and forecasts - and his despicable ethics.
TTP
Despicable ethics you say?
Wow. Just wow. The prize for the pot calling the kettle black goes to TimTP
https://www.nbr.co.nz/article/property-brokers-and-director-ordered-pay…
Jesus Christ, what a load of trash.
Where do you even begin with such a comment?
Yup, Tim (the discraced) like a few others here, are feeling threatened.
Party is now over.
Tom, are you sure that calling other commentors who have different views to your, a knob, is the best way to make your point?
DGM vs knob.
If the intention is to offend and it’s is good enough for one side, surely it’s ok for the other, especially if the descriptions are accurate?
☝☝☝☝☝☝ 100% this ☝☝☝☝☝☝
Don't be a knob mate - from the DGM's
Two wrongs don't make a right IO, also I never call anyone a DGM
Yet you probably have never judged TTP for their name calling. Biased?.
Yvil.. his comments were obtuse and nasty. I’ve got a lot of time for opposing views, but bullying triggers the odd retaliatory comment from me. I hate bully’s, particularly narrow minded ones.
Insinuating that one is a knob is fairly insulting to knobs.
Especially your flaccid knob, Brock Landers, which you have previously (and inappropriately) revealed here.
TTP
The property market is going to be very flaccid this year.
Your daydreams are your own business. Please keep them to yourself.
There is a scene in Boogie Nights where Dirk Digler (aka Brock Landers) is in a truck and he cannot get it up
The 70s was a hell of a time.
Yep watched the movie it was only on TV a couple of days ago. Unfortunaly some people here don't know the difference between having a big dick and being a big dick.
"What really upsets these renter DGM are they are also paying down the landlord’s mortgage and not their own."
I think you should tune down printer8, this is a pretty bad thing to say.
Anyways:
Not all renters are DGM
Not all DGMs are renters
Not all owners prefer personal wealth over a better society
Not all DGM are upset (I am personally being very entertained)
I would be very worried in being an exposed investor right now
and... yeah, you should calm down
I would be deemed a DGM, I'd gladly see house prices take a considerable fall. My only self interest would be the bank leave me alone if we end up in negative equity but still paying the mortgage. But house prices would need to fall over 40% for that to eventuate.
I think it unlikely that a bank would choose to foreclose on a negative equity situation unless they have a view that the servicer is unlikely to meet their P&I obligations. Aside from the bad PR, they would be doing this across the board (forcing prices down further) and crystallising losses for themselves unnecessarily.
These ones of yours apply to me:
Not all DGMs are renters
Not all owners prefer personal wealth over a better society
lucerna
My comment is not directed at "renters".
If you read my comment you will note that I refer to "renter DGM" - that is those who continue to spiel D&G and talk down housing criticisng those FHB showing the initiative to overcome what is a difficult problem of affordability.
A case of this was in the last few days of Brock Landers was critical of a FHB who bought late last year.
Yes, it is really tough for FHB to save a deposit and, what is commonly ignored on this site, the added current issue of increasing mortgage interest rates. I do not envy them. It is pleasing to see that in the last year just on 32,000 mortgages went to FHB (RBNZ data) - likely around 50,000 people as FHB - and for those it is great. They have the financial and social security and intrinsic value of homeownership. Any fall in house values is irrelevant - it will remain the same home - and as to the risks of falls in value or increase in mortgage rates the banks will be asring themselves in their self-interest that the borrowers are on a sound footing.
To those who wish the same, yes, it is very tough and I wish them well.
Those such as Retired Poppy, and especially renters such as InterestedObserver and Brock Landers who continually scaremonger I direct my comments.
Interested in hearing your thoughts on the prospect of new build townhouses as investments.
HM
Very simple: Yield.
I have no problem that the housing market is likely to be flat or show some decline in the short term and that interest rates (despite your call to return to 2 to 3% within two years) will rise and remain higher than currently for the seeable future . . . but then so too rents will most likely also rise in the medium term along with inflation and wage increases.
I first posted in November 2021 that I saw the outlook for house prices flattening and some fall likely due to affordability issues for FHB and yields for investors: I was surprised that it took just under a year including Government intervention to what seems to achieve that.
How long do I see the flat period at best lasting? Given that Auckland was flat/some decline for two years during 2017/18 after a period of rapid increase, as I have often said future talk at the BBQ in the medium term at least will be recalling the decade of exceptionally high house price rises.
For FHB, it is about a home. Short term fluctuations in the market are irrelevant whereas - the much ignored factor on this site - future of interest rates in the short and medium term will be the far more significant factor.
For investors, they are not inexperienced and can make an informed decision. They will already extremely likely have experienced homeownership for many years, if more than ten years they will know a bit about movements in both house values and mortgage interest rates.
Thanks for the reply, although I note you haven't really answered my question at all.
HM
I thought it was clear - "yield". One needs to do their sums on a specific property.
When you talk about investment, I assume that you are talking long term of five years or more (such as determined by the Brightline test on new builds). There is unlikely to be significant capital gains in the short and even medium term of five years; beyond that if one is looking at it for retirement income in 20 or 30 years time then one is most likely to see some capital gain. Most investors I know simply see capital gain as a possible bonus; I informally meet most months for a coffee with a small group of friends who are investors - I am currently not - and discussion about any purchase is always about cash flow.
Thanks.
In which case, most new builds are not good investments.
HM
So on that conclusion we are not going to see a rush of investors looking to buy new builds as the Government announcements last year hoped for.
A neutral comment - not being critical. :)
Yes I agree. And that's why I think along with disappearing FHBs the residential construction is going to slump :)
And interest rate rises will halt / reverse :)
Thanks for answering
I think that is terribly sad that owning or not an house is such a divisive attribute.
You have your reasons. I'd just prefer that the blast radius of certain comments could be more "controlled"
We aren't enemies
lucenera
I strongly support homeownership as part of the New Zealand social values and culture.
It is sad to see home ownership for 25 to 35 year olds has fallen from over 60% in 1990 to around 35% in 2018. While this has been a trend for the past 30 years, it has become increasingly so over the past few years due to increasing affordability and in in particular the difficulty is the ability to save a deposit.
What causes me concern me and which I will call out are the posters on this site who scaremonger - such as Retired Poppy who over 2018/19 specifically discouraged FHB, and Independent Observer who has been calling bubble burst for the past seven years.
Yes, but RP was correct on the fundamentals.
He was correct to say that housing was overpriced back then.
He was correct to say that a crash was coming.
The ONLY bit he got wrong was not predicting just how far the RBNZ would go to prevent a bubble burst. But to be fair, NONE of us predicted that. Who could have foreseen the massive market interventions ... the vigorous can kicking ... that the RBNZ has been involved in lately?
The fact is that RP is/was correct. The housing market is crashing. Now. And it will likely crash back down to a lower house-price-to-income ratio than it was when RP first started calling "crash" all those years ago.
No, RP was definitely NOT correct when he advised FHB not to buy several years ago. The FHB who didn't take his advice have enjoyed at least 50% gain in the value and are several years into Principal repayments. They are light-years ahead of FHB who listened to RP and are still renting. They have also enjoyed pride of ownership, the freedom to do what they want with their own house and security of tenure.
There is no way that RP's advice for FHB not to buy several years ago was good advice, actually it was terrible, extremely expensive advice
A case of this was in the last few days of Brock Landers was critical of a FHB who bought late last year.
Correction. I was critical of first home buying late last year and said that "only idiots would be buying now".
Somebody who disregarded my sentiments and made that mistake then had a public tantrum about being "labelled an idiot" when it turned out to be correct. I actually feel bad for the guy.
It might be time for you to ease up on the toxic personal attacks you make on anybody that holds an opinion that threatens the value of your real estate holdings. It's pathetic.
That is kind of bullshit really. My friend just sold his place to FHBs for $1.7 million (via the bank of Mum and dad). If that place drops in value to say $800k, do you really think they will be happy to have a house? Don’t you think that is a crazy amount of money for people to commit to?
What an irony. The house prices go up and the rents will go up accordingly.
Who is impacted by the rent rise? The working poor and the tax payers. Taxpayers pay for the homeless and the beneficiaries.
And the top leader of the current government says that house prices should keep rising and its a good thing. Who does that help? That helps the rich and the investors. A middle class family with an average income and a house do not care if house prices increase because it's an asset they are not going to sell as they have to live in it.
If they have to sell and move, they will do it in same market, so it doesn't matter what price is their house as they will sell abd buy around the same price.
If only we had intelligent leaders who cared about the poor than their own self interests because 80% MP's are house investors in this country.
well... there are political parties that claim to be pretty inclined to deal with that. Greens, TOP and Maori Party.
The real story is that poors, renters, youngs are not involved too much in politics so the vast majority of the votes goes to the usual major parties.
I am not sure on what basis Nat or Labour will do electoral campaign, promising what, or defending what ideology. It's an obvious joke. But votes are important, and if you want a government more in line with what you desire you should take it seriously.... otherwise same old same old, no real changes, good for people with no future, no hopes, no ambitions, no empaty, just afraid of changes, stick to the play safe mindset.
The desire to capitalise falling discounted present values of future cash flows associated with residential property is diminished when interest rates start rising.
Yep and the whole American mortgage market is assuming the yield curve can and will only go one way. What happens if it doesn't?
I'm sure some landlords will have sobering realizations come this years talk with their accountant & submitting tax...
Surely someine here could give a comparison on internal rate of return of" new build for rental purposes" against existing lower quartile rental?
Projecting that ,in 3 years time ,interest cost deductibility for existing rental,is zero. I am not in the market ,so its academic interest only.
It would appear that the likely difference is sufficient to move the investor action to new builds,as is intended by government policy?
One would think that the 39% potential tax take on the existing rentals net income( without the ability to deduct interest cost to offset the tax assessment, if it is held as personal property ),would also motivate an owner of an existing rental ,to pursue a new build substitute.
Has anyone done the numbers ,for Auckland for example ,where the cap rate is lowest,and motivation to switch , potentially ,highest.
Would I be better to ask in an investor forum?
Apparently Printer8, TTP and CWBW are experts on these matters so they can advise I am sure.
Not my area, but new build townhouses don't look a brilliant proposition to me despite some government incentives. Yields typically around 3.5-4% gross, and I don't fancy their ability to accrue significant capital gain over coming years.
It looks the same to me. Hard to see much immediate capital growth on a 3 bed terrace, at 900k+ or any actual income, even if its getting $ 750 week rent, in fact ,I can not make a calculation in most combinations ,that shows better than 3% net yield,on the 40 % deposit component. Maybe one actually needs to do a multi unit " build-to-let" , to see anything worthwhile ,but not right now,only in 3 years time,with material and labour shortage behind us, and land cost component more in balance. Just looks like a range of lack lustre through to financial thrashing ,any way I look at it ,presently.
Agree.
Would be interesting to hear from our in-house property investment experts, the 3 I mention above plus say Yvil.
Rather than providing mindless property spruiking rhetoric (to be fair Yvil at least has toned that down a lot), they might like to provide their considered, constructive expert thoughts on the prospects of new build townhouses as investments.
Because, what would I know?
FWIW...
I think there's a bit of a conundrum with investing in new build townhouses:
1. The 'cheaper' ones offer 'better' (3.5-4%) yield, and are more accessible (financially) to buy
2. However, the cheaper ones have less prospect of appreciating significantly in value
3. The more expensive ones in better locations offer poorer yield (2.5-3%) and are less accessible (financially) to buy
4. However, the more expensive ones have more prospect of appreciating in value
So I don't think it's realistic to expect good rental yield (or at least bare minimum rental yield) AND strong capital gains buying newbuild townhouses.
Further, in a high inflation environment, where interest rates are increasing as well as term deposits, is 3.5-4% gross anywhere good enough?
Hey, HouseMouse, give people a chance to reply - please. (It's Saturday, you know, and my landlord turned up to inspect my pokey little dwelling.)
In the long-term, my general view is that land-based real estate is a better bet than (cheap/budget) new-builds - typically on tiny pieces of land.
Buildings eventually crumble, are demolished - or whatever. But land is forever and keeps appreciating. But, of course, a dwelling of some kind or other is almost always needed to attain a rental return. Thus, bare land is not a feasible investment for many people - they need to get a return to pay rates.
Personally, if I was an investor I wouldn't generally be interested in new-build townhouses. But there are always exceptional cases. It all depends on "the numbers" at the time.
TTP
Thanks TTP, excellent response, and I agree.
There will certainly be some new build townhouses that stack up as good investments, but I think they will be very much in the minority.
Good reply TTP, also generally a new build has already made best use of the land, i.e. it's hard to add value whereas there is a lot more potential to improve an older house's value, especially with some extra land
My only experience with a newly built house was that the wear and tear on the new carpets, fixtures including white-ware and stove, as well as the numerous scratches and dings in walls and door frames etc meant that when I went to sell seven years later there was considerable cost in bringing the place back to standard. I had good tenants but even good tenants never take the level of care one has as a owner.
While I always looked to good properties to attract good tenants I decided not to invest in a new property again.
You now pay tax on the rental income for old houses though right? So basically 33% less yield. And prob lower rent too due to lack of insulation, double glazing, etc. it could end up that an old house on big land that costs 50% more than a new build actually achieves half the rent after tax. So you really do need capital gain.
to be honest I can’t see any investment property stacking up right now unless you are looking at very long term capital gain (which I think is being hopeful if population doesn’t increase esp with boomers dying off) or banking on national being elected and resurrecting the property party.
Good comment. Nice to see people engaging in some on-point financial discussion, rather than silly name calling. Which I admit I resort to sometimes.
So yes, generally I don't think residential property investment is very sound if considering buying from this point in time, whether existing or new property, for different reasons.
As you say, the exception could be if held for at least the mid to long term - say 7-10 years plus. But people shouldn't expect anywhere near the capital gains of the past, and given all the legislative changes and obligations and need for landlords to put more of their own money in, it's gonna be much harder to get that juice out of the orange.
And if you want a better chance of capital gains, then it's going to be property with a bit of land rather than townhouses on postage stamps or apartments. But having said that, wiht the RMA changes this year there might also be far less gain in landbanking.
Another reason I think it's a bad idea buying new townhouses as investment properties is the oversupply that's hitting us in Auckland.
In the next stage of the townhouse development I'm living in, several of the new townhouses have been sitting on the market for 3-4 weeks. These are above average quality townhouses, well designed, and the asking rents are not over the top.
I'm not sure if omicron is having an impact, it might be to a degree, but I suspect it's more because of oversupply and zero migration.
Yep they are popping up everywhere. Just been walking around onehunga and there are a lot of big developments. I have a cousin that lives in Melbourne, near the city they have so much oversupply that you can rent a nice 1 bed for $300 a week.
if you were a renter though, would you go for a new double glazed fancy place or an old shit box on a big section you have to maintain? That’s my point, the yield on the big section places will only get less and less, so you have to bank on capital gain, and I don’t see any guarantees on capital gain with higher interest rates and low population growth.
If your idea of property investment is just buying an average house and renting it out, then no, it makes no financial sense at all to buy now. I would actually not really call this investing but rather gambling. On the other hand, if you're astute you can buy a house for less than it's worth and then find ways to increase its value. I have bought a house in August 2021 and I'm confident its worth 40% more today, also I'm not finished with it and I know I can improve it further. To me that's property investing.
Converting the garage into a “nice” appartment with a bit of mdf and paint?
Maybe that's your style but definitely not what I do, you see people are not stupid and if you want to do well, you have to treat others well and provide them quality and value
I'm not sure if the next generation will have the same appetite for residential property investment.. there may be better alternatives available.
Rents have seen remarkably consistent increases since 2009 (post GFC) with 3% to 3.5% per annum increases in stock prices. This steady rise is because rents are primarily determined by what people can afford to pay, rather than the value of housing. House prices behave like speculative assets of course - moving with credit availability and buyer confidence in future returns.
There is evidence that causation actally flows from rent to house prices at the bottom end of the housing market - particularly in areas with high concentrations of rentals. What a landlord can charge for rent sets a floor for house prices in those areas and relatively high levels of Govt supplement probably explain why the least desirable areas of NZ still have house prices that are much higher than less desirable areas in other countries. If Govt want to make entry level house prices more affordable, they need to turn off the accommodation supplement tap.
In 2018 they were keen to flip open the chequebook and splurge so did everyone a favour and increased the AS along with benefit increases. Nice one cindy
Who Cindy?
I’ve personally decided to buy a yacht and completely unplug from all the housing BS in NZ. I’ll be living on a 32 foot yacht at the marina. I sold my home last year. It got to the point where all the mania and greed has ruined this country (in my opinion). I have substantial funds in the bank and will be looking to invest and participate in NZ start ups. I’m 42 and I feel liberated by my decision. Needless to say I really don’t care about rental yields, I’ll be sailing for the next few years. Hopefully one day a government will have the fortitude to sort out the mess, but for me, unplugging made the most sense.
Awesome, good on you! I would strongly consider doing the same if it was just my choice, my better half wouldn't approve unfortunately...
The are a few people living on boats down at the local harbor, some of them look like pretty 3rd world conditions. If I see them when I'm coming back from a fishing trip I'll give them a fish, feed them for a day.
No different to most Auckland suburbs I guess. You been to the cbd recently? Or most of South Auckland. My daughter volunteers at one of the homeless shelters. She says the demographic is surprising, mostly every day kiwis (some in suits), self employed people with their kids, all there for a feed as they have no money and no options. We could all do ourselves a favour and wake up. How important are rental yields when the bottom end is falling apart
.
Interesting choice, a 32 foot yacht is very small to live on
I’ve always got the option of re entering the market next year at a much more favourable price point, although I doubt I will. It’s more about the lifestyle from here…. I can comfortably save a grand a week as outgoings are minimal. For me, it’s way more appealing than being a debt slave or some fat greasy landlords cash cow. Each to their own I guess
maybe 42... and maybe a cat.
Nice work. I am firmly in your camp and have refused to participate in the madness, much to the bemusement of friends and family. We are looking to buy a 50ish footer and head off for 3 or 4 years. Just waiting for boat prices to normalize a bit, and maybe hoping for a deal as the toys are off loaded due to a lack of wealth effect.
It's easy to increase the yield without increasing the rent - just sell the property for less.
If the property market does continue some considerable falls, keep an eye out for the Herald articles celebrating yield increases.
Government bonds must be starting to compete with property in terms of an attractive investment - at least with one you are guaranteed (in most...) to get your capital back. Then again you actually have to have funds to invest as opposed to speculating with debt.
These have to be gross yields, even paying cash for a rental net yields would be much lower. It's a long term investment and it's very difficult to get any positive cashflow in the short term, but who cares when you are making 10k per month in capital gains.
Or for the people who purchased in Auckland late last year...50K losses per month.
Leverage works both ways. Ouch.
This is an often forgotten point due to the one way traffic to recent time. But leverage can indeed apply in reverse leading to the inevitable phone call from the bank. After 87 Banks have tried to avoid picking at this thread if you still make payments. Debt stacking can unravel quite quickly.
We approach the end of a debt super cycle. Let's see what happens...
That would be 3-4k homes, maybe 1-1.5k rental properties.
Is CWBW still in the basement with the boys?
To quote Steely Dan, it seems "everyone's gone to the movies"
Signs of supply catching up
These multi-accounts are out of control in the comment section.
It's good value I think, nothing gets people as stirred up as property does, at least not on this website.
Anyone know why we talk about yields where property businesses are concerned and profit where other businesses are concerned?
Yes, I do
Personally I refer to yields when evaluating performance of both (former) property investments and business (shares) investments . . . just as I consider yields (interest rate) on term deposits.
Profit is an irrelevant measure as it does not reflect the return on the capital invested.
Businesses usually headline report their profit as it easily reflects their trading performance compared to previous years. However, that in itself it is not a indicator when investing in a company - buying shares one always looks at yield as profit says little about your return on investment.
Because property businesses in the past have been arranged so as to never be profitable from a cash flow perspective so as to avoid ever paying tax.
The whole industry would have been called a sham years ago if everyone knew that we had a sector of business that was arranged to always lose money in order to avoid contributing to the public good via taxation.
A normal business would be declared insolvent. Its model has been focused on tax avoidance. Underlined by Propeller property adds on the radio promoting the "huge tax advantages" of new houses.
Hi All
My first post - I mostly enjoy reading the articles and comments although some of the comments seem to get quite heated and personal. Anyhow, a question for the investors - I bought a few rentals in Sep 2020. I am lucky and have good tenants and I haven’t increased rent so I think it is below market. The rent covers pretty much everything like interest on mortgage, rates, insurance and property manager fees. But it doesn’t really cover much principal not a fund for maintenance, which I pay from my personal income. I bought them for long term so in 20 years I will have an income stream. I am happy to pay the principal it’s like forced savings. I wonder when investors talk about yield is the principal of the mortgage taken into account or not? Cheers Piggy
Hi Piggy. Welcome to the forum. Yes it's far too heated at times, without taking sides nasty I suggest you use you rationale rather than your emotions to make investment decisions.
As gor your question, no repayments are not included in the yield as they are effectively a form of savings.
Cheers
Gross yield is what return the property produces as a percentage if you were to buy it today and before any expenses are deducted. Sometimes investors also refer to 'their' yield based on what they paid when they bought the property. Such as, "I am getting 15 percent return on my rental" This is slightly misleading to anyone listening.
Net yield takes rental expenses into account. However those rental expenses would never include capital/mortgage repayments. A cashflow calculation would do that
I hope that helps and well done with the rentals.
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