Buy to Let Investor Yields Rising in New Zealand

Buy to let property investor yields are rising in parts of New Zealand according to Interest.co.nz’s latest Residential Investment Yield Indicator.

The indicator suggests the combined effects of falling house prices and rising rents are driving up investor yields in Auckland and parts of Wellington, making residential property relatively more attractive for both local and overseas property investors.

The Indicator tracks the median rent for three bedroom houses in 56 locations around the country where there is a high level of rental activity, based on bond data from Tenancy Services, and combines that with lower quartile selling price data from the Real Estate Institute of New Zealand for three bedroom houses in the same locations.

That information is then used to provide indicative gross investor yields for each of those 56 locations, allowing an apples-with-apples comparison of the relative attractiveness of investing in each of those areas, based on underlying rental returns.

Actual investor yields will, however, vary depending on factors such as how much debt investors take on, the maintenance requirements of individual properties and vacancy levels.

The latest figures for the six months to the end of June show a particularly strong trend in Auckland, where investor yields were up in seven of the 10 suburbs tracked, unchanged in one and down in two, compared to the six months to the end of March.

That was driven by increases in median rents in eight of the 10 suburbs tracked (rents were unchanged in the other two) and declines in lower quarterly selling prices in eight of the 10 suburbs.

Investor yields are similar in the Waikato and Bay of Plenty and most of Wellington, where there is also high tenant demand for rental properties.

With interest rates at historic lows and likely to fall further and capital gains receding, investors will be keeping a close eye on yields as they weigh up their investment options.