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SuperCity offerings for investors

Auckland’s prices are rising again and that has an impact on the yields SuperCity investors can expect.

Monday, April 18th 2016, 2:30PM

by Miriam Bell

Several months of a lull in the Auckland market have come to an end, with the latest data from all sources showing activity and prices have picked up.

Westpac chief economist Dominick Stephens said the Auckland market has exploded back into life.

The rebound itself is not particularly surprising as the tax and LVR measures introduced last year were always expected to have a temporary effect on the trajectory of house prices, he said.

“But we must admit that the power and extent of the rebound in March has taken us by surprise.”

With prices almost back to their pre-restriction highs, Westpac has revised its national forecast of 2016 house price inflation up from 6% to 11.5%.

While prices continue to go up, to date rental asking prices have not kept pace with them – although some believe they may start to rise this year.

For investors, this means that the yields on Auckland properties continue to fall.

Barfoot & Thompson’s March rental data shows that Auckland’s already low gross yield* for three bedroom properties has declined further year-on-year.

In March 2016, Auckland’s average sale price was $863,255 and the average weekly rent was $510, which left the average gross yield at 3.07%.

This is as compared to March 2015 when Auckland’s average sale price was $738,914, the average weekly rent was $486, which returned an average gross yield of 3.42%.

Most suburbs around the SuperCity are now returning lower gross yields, for three bedroom properties, than they were at this time last year.

Few suburbs returned gross yields of above 4% for three bedroom properties in March 2016, but the top 10 yielding suburbs were:

1. Clendon Park: 4.77%
2. Otara: 4.56%
3. Weymouth: 4.45%
4. Wattle Downs: 4.12%
5. Mangere: 4.07%
6. Manurewa: 4.03%
7. Tukau: 3.99%
8. Papakura: 3.92%
9. Gulf Harbour: 3.89%
10. Manukau Central: 3.68%

Eight of these suburbs are in South Auckland which indicates that the south remains more fertile ground for investors focused on returns than most parts of Auckland.

It’s worth noting that even these suburbs have seen declines in their gross yields. For example, in March 2015, Clendon Park’s gross yield was 5.59% while Weymouth’s was 5.30%.

However, while Auckland yields may not be particularly attractive, the SuperCity retains other charms for investors.

BNZ chief economist Tony Alexander said investor demand remains strong in Auckland because people are investing in land able to be developed as intensification intensifies.

This is because people are buying not just for capital growth.

Alexander said they expect the price of what can be done to their property to go up in an environment where widespread moves to reduce intensification are very unlikely.

“Intensification will come. It’s inevitable, which is why people will keep buying for future potential development driven by population growth pressures.”

* Yield calculated using average sales price and average rental per week for three bedroom properties – for new and current tenancies as at April 1 2016.

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Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans ▲6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 ▲4.29 ▲5.09 ▲5.35
Kainga Ora ▲5.43 ▲4.57 ▲5.58 ▲5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - ▲4.19 - -
The Co-operative Bank - Owner Occ 5.45 ▲4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 ▲4.79 5.69 5.95
TSB Bank 5.59 ▼5.14 ▼5.79 6.15
TSB Special 4.79 ▼4.34 ▼4.99 5.35
Unity 5.65 ▲4.80 ▲5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

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