SuperCity yields improving

Kiri Barfoot

That’s according to Barfoot & Thompson director Kiri Barfoot who says the average Auckland rental property is now delivering a gross yield* above most mortgage interest rates.

“The gross rental yield for the typical Auckland rental was 3.27% through April and May, when we also saw many special fixed mortgage rates dip under 3.00% to historic new lows.

“This means we’re seeing a balancing, even a shift, between the cost of borrowing and the potential gross gain on a rental property.”

Barfoot & Thompson calculates the gross yield figure by comparing the average annual revenue from three-bedroom tenancies to the average price of three-bed homes sold by the company over the past six months.

So, with the average rental price for a three-bed Auckland home at $584 per week, or $30,368 a year, and the average three-bed sale price over the past six months at $938,688, the yield is 3.27%, Barfoot says.

“While this number represents just one calculation a potential investment buyer should consider, it is a change worth taking notice of.”

Other regions with lower house prices tend to have higher yields. In comparison, Auckland’s high prices mean yields have tended to sit around 3% or even lower (2.85% in late 2016).

But now 12 Auckland suburbs are delivering yields of over 4%, with the top yielding suburb (Conifer Grove) turning in a yield of 4.87%. Further, nearly 60 Auckland suburbs now have yields above 3%.

Barfoot says that given mortgage rates are expected to remain low for some time, it presents an appealing opportunity for those considering investing in a rental or expanding their portfolio.

While the rent increase freeze is still in place for existing tenancies, the average price for newly rented properties not subject to the freeze indicated modest growth in many areas of the city, she says.

“For those considering an investment purchase, key right now is finding an individual property with numbers that stack up, and that is less exposed to current vacancy pressures.”

In reviewing yields by suburb over recent years, the more southern, western and northern areas of the city tended to perform best, Barfoot adds.

Auckland’s 12 top yielding suburbs:

1. Conifer Grove: 4.87%
2. Clendon Park: 4.73%
3. Otahuhu: 4.73%
4. Gulf Harbour: 4.73%
5. Auckland Central: 4.18%
6. Waiuku: 4.16%
7. Manurewa: 4.12%
8. Takanini: 4.11%
9. Army Bay: 4.11%
10. Sunnyvale: 4.05%
11. Ranui: 4.02%
12. Tuakau: 4.01%

*Gross yield does not take into account operating costs, interest rates, vacancies or capital gain and will vary across individual properties.