Regional yield variations examined

Its latest Property Focus report has examined rental yields around the country, by looking at Real Estate Institute median prices compared to bonds lodged.

Nationwide yields dropped from 8% in 1992 to well below 6% in 2012. Auckland’s average yields dropped from 7.4% to 4.2%. Otago’s dropped sharply from 9.5% to 3%, Wellington’s went from 7.8% to 4.3%,Waikato’s went from 6.8% to 4.4% and Northland’s dropped from 6.5% to 4.7%.

The report notes that while house prices have risen 250% since 1992, rents have only increased by 120%. Since 2007, increases in rents have outpaced increases in property prices, although that is starting to change again.

Auckland’s rental yields are now only slightly below the national average, suggesting prices are not markedly more expensive when compared to rents.

Low mortgage interest rates are prompting housing market activity around the country, the report says. It points out housing turnover is 11% shy of historical averages as a proportion of total housing stock.

Of its ten property gauges, only one shows any negative pressure on house prices – the high level of household debt. But it notes that servicing as a percentage of disposable income is at a 10-year low.

Factors pushing prices up include low interest rates and a lack of available housing. ANZ notes that increasing competition in the mortgage market has resulted in cuts to the six-month and four- and five-year rates on offer.

ANZ said official cash rate cuts were off the agenda and suggested a mix of six-month, one-year and two-year terms as a good borrowing strategy.