SuperCity yields on steep decline

Barfoot & Thompson’s April latest rental data shows that, as Auckland’s house prices continue to go up, the city’s average gross yields are going down.

While average weekly rental prices are growing steadily, they simply can’t keep pace with the skyrocketing sale prices. 

This means that, although the average price of a 3-bedroom property has increased by 30% over the last 24 months, the average gross yield has decreased by 16%.

The average gross yield has fallen from 3.97% in May 2013 to 3.33% in April 2015.

Barfoot & Thompson director Kiri Barfoot said that, depending on when and why an investor bought their rental property, this decline could leave them a bit unhappy.

“Most Auckland investors should be experiencing good capital growth though so, even if they bought for rental yields, they will be seeing some gains.

“It’s a bit of a trade-off between rental yields and capital growth. But most people who buy houses in Auckland know that.”

It also pays to remember that there are considerable differences in gross yields in different parts of Auckland, she said.

For example, the average yield in Epsom is currently 2.62% while in South Auckland’s Clendon Park the average yield is currently 5.48%.

“Therefore if you are buying in Auckland and you are looking for a decent yield, buying out south or further out of the central area is a better proposition.”

However, house prices won’t keep going up forever, Barfoot continued.

“People tend to forget that. A while back there was a period of years when Auckland house prices didn’t move at all.

“It all depends on how long someone holds a property for.”

When prices do stabilise, yields are likely to improve – which should benefit those with a long term buy-&-hold strategy.