Landlords may be cheering capital gains but low rental yields make bargains hard to find

Gross rental yields on new residential  property investments remain under 5% in  parts of Auckland and between 5% and 6% in many other parts of the country, according to the latest REINZ/Interest.co.nz Rental Yield Indicator.

A gross rental yield is the annual rent a property could generate expressed as a percentage of its purchase price.

The Indicator monitors the median value of new tenancy bonds lodged with the Ministry of Business Innovation and Employment in 40 areas around the country where there a high level of rental activity and calculates a gross yield for each area using the REINZ's lower quartile selling prices for the same areas.

In both cases the figures for all but one of those areas were for three bedroom houses (Grafton in Auckland was the exception and used figures for two bedroom apartments) because these were the most commonly rented types of properties in each area.

They were drawn from unconditional sales made and bonds received in each of those areas over the previous six months.

So the Indicator measures the gross yield that would be achieved if an investor had bought a property at the lower quartile selling price for that area over the last six months, and then rented it out at the median rent for that area.

Of the 11 suburbs monitored in the Auckland region, five had yields under 5% for the six months to September, with the lowest being Highland Park in west Auckland where it was 4.3%.

The highest yield was for 2 bedroom apartments in inner city Grafton, at 12.2%. which was the highest yield of all the areas monitored.

South of the Bombays yields improved markedly, ranging from 5.8% to 7% in the suburbs monitored in the Waikato and 5.2% to 6.9% in the Bay of Plenty.

Investors in the capital are also likely to find richer pickings than their Auckland cousins with yields in the 5.4% to 6.2% range.

In Christchurch they ranged from 5.1% in Riccarton to 8% in Woolston/Opawa.

Because of slight changes made to the boundaries used to collect the data in seven areas monitored since the last edition of the Indicator, it was only possible to make comparisons between the September  and June figures for 33 areas.

Of those, yields increased in 15 areas, declined in 11 and were unchanged in seven.

for selected areas with high rental activity during the previous six months
Town/region	Yield %* Sep-14	Yield %* Jun-14
Whangarei - Kamo/Tikipunga/Kensington	6.4	5.9
Rodney - Orewa/Whangaparaoa	4.8	4.2
North Shore:
Beachhaven/Birkdale	4.6	4.9
Torbay	4.5	4.5
Waitakere:
Glen Eden	5.1	5.0
Massey/Royal Heights	5.1	5.0
Henderson	5.0	5.3
Central Auckland:
Avondale	4.5	n/a
Grafton (2 brm apartment)	12.2	n/a
Manukau:
Highland Park	4.3	4.6
Papakura/Drury/Karaka	6.0	6.0
Franklin - Pukekohe/Tuakau	5.6	5.8
Hamilton:
Deanwell/Melville/Fitzroy	6.9	6.9
Fairfield/Fairview Downs	7.0	6.9
Te Kowhai/St Andrews/Queenswood	5.8	5.5
Cambridge/Leamington	5.9	5.9
Te Awamutu	6.4	6.0
Tauranga:
Tauranga Central/Greerton	5.9	n/a
Bethlehem/Otumoetai	5.4	5.2
Mt Manganui	5.2	5.2
Pyes Pa/Welcome Bay	5.8	5.7
Kaimai/Te Puke	5.7	5.6
Whakatane	6.9	n/a
Hastings - Flaxmere	11.8	12.0
Napier - Taradale	6.1	6.1
Kapiti Coast:
Paraparaumu/Raumati	5.9	n/a
Waikanae/Otaki	5.4	6.1
Wellington:
Johnsonville/Newlands	6.2	5.9
Vogeltown/Berhampore/Newtown	5.6	5.8
Tasman:
Motueka	5.5	5.2
Richmond/Wakefield/Brightwater	5.9	6.0
Nelson - Stoke/Nayland/Tahunanui	6.0	6.0
Blenheim	6.5	6.1
Christchurch:
Hornby/Islington/Hei Hei	6.3	6.4
Riccarton	5.1	5.7
Woolston/Opawa	8.0	7.9
Ashburton	7.2	6.8
Timaru	6.3	n/a
Queenstown/Frankton/Arrowtown	5.3	5.4
Invercargill	9.5	n/a
Source : REINZ / MBIE * Yield is a property's annual rent expressed as a percentage of its purchase price. The yield figures in this table are gross, and are calculated from the REINZ's lower quartile selling price for each area during the previous 6 months, and the median rent calculated from new tenancy bonds received by the Ministry of Business Innovation and Employment for the same areas/period. Some areas such as New Plymouth, Palmerston North and Dunedin have been excluded because the geographic areas used by the REINZ and MBIE to collate their data did not match.