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Yield-seekers should look south: Report

South Island rental properties are delivering some of the country’s best gross yields, according to the new Westpac Property Investor Report.

Thursday, March 27th 2014, 12:00AM

by The Landlord

It compares capital gain and gross yields of two-bedroom apartments and three-bedroom houses in Auckland, Christchurch, Wellington, Hamilton, Dunedin, Tauranga and Palmerston North.

Westpac’s general manager retail bank Ian Blair said investors needed to know what they wanted to achieve with their investments.

“Investing for gross yield and capital gain require two different strategies and it is vital investors understand that from the outset. Capital gain can be a shorter-term prospect while yield is more commonly a long-term play.”

Three-bedroom houses provided the best yields, of between 6.8% and 8.3%, in Dunedin, Tauranga and Wellington.

A Forbury, Dunedin three-bedroom home renting for a suburb-average $300 and with an estimated average valuation of $189,000 topped the yield table, returning 8.3%. It was followed at 8.2% by a South Dunedin home renting for $266 and valued at an average $170,000.

But Auckland provided the best capital gain opportunities, with houses returning 14.4% to just under 19%. Christchurch was the next best spot for capital gain, at up to 14%.

A three-bedroom house in Glen Innes provided the best capital gain in the survey, of 18.9% annually.

Meanwhile, a Westpac report has shown that there is still a problem of underbuilding in Auckland reducing supply, but the shortfall may not be as severe as it had been thought. That lack of supply has been pointed to as a driver of increasing house prices, and Auckland's strong capital gain results.

It said the city had built 13,640 too few houses over the past five years – down from the 21,840 that was estimated a year ago.

Westpac’s economists said the drop was driven by the fact that the Census showed the population had increased less than expected and that the rate of increase in housing stock had been faster than estimated.

“The pace of residential construction in Auckland has ramped up by 20% over the past year, and now stands close to 6000 dwellings per annum. Nevertheless, the pace remains far too slow. We estimate that just over 9163 new units will be needed per annum in Auckland, which would require a further 53% increase in construction activity.”

The report said Wellington and Nelson/Tasman were building too few homes but Northland might have been overbuilding in the past five years.

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.15 ▼4.04 4.49
ANZ Special - 3.65 ▼3.54 3.99
ASB Bank 5.20 4.15 4.09 4.39
ASB Bank Special - 3.65 3.59 3.89
BNZ - Classic - 3.65 ▼3.49 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
Housing NZ Corp 5.19 ▼4.15 ▼4.09 ▼4.39
HSBC Premier 5.24 3.35 3.35 3.35
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.65 3.85 3.95 3.89
Kiwibank 5.80 4.30 4.34 4.74
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.59 3.99
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.69 4.79 -
Resimac 5.30 4.86 4.14 4.19
Lender Flt 1yr 2yr 3yr
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.69 3.69 ▼3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.65 3.59 3.99
The Co-operative Bank - Standard 5.15 4.15 4.09 4.49
TSB Bank 6.09 4.65 4.59 4.85
TSB Special 5.29 3.85 3.79 4.05
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.34 - - -
Westpac Special - 3.65 ▼3.54 3.99
Median 5.35 4.15 4.09 4.19

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