Residential rental yields have remained steady this year, although falling interest rates will make them look more attractive to investors

Residential rental yields have remained steady this year, although falling interest rates will make them look more attractive to investors

By Greg Ninness

The investment outlook for residential property remained remarkably resilient in the first half of this year, according to interest.co.nz’s Rental Yield Indicator.

The Indicator tracks the Real Estate Institute of New Zealand’s lower quartile selling prices for three bedroom houses in 56 locations around the country where there is a high level of rental activity, and the median rent for three bedroom houses in the same areas.

Those figures are then used to produce an indicative gross rental yield figure for each of the 56 locations, allowing an apples-with-apples comparison of the gross income earning potential in each area.

The latest figures show that in spite of a fairly tumultuous first half of the year, the outlook for residential property remained relatively stable.

The year started with the residential property market in fairly buoyant form with firm prices, but the market came to a virtual standstill for much of the second quarter, with sales and renting activity curtailed by the COVID-19 lockdown.

Yet in spite of these unusual market conditions and the prevailing economic uncertainties, yields remained remarkably resilient.

For the most part rents and selling prices were both mostly higher over the six months to June compared to the six months to March.

But overall, indicative yields remained remarkably stable, with yields rising in 20 of the 56 locations monitored in the six months to June compared to the six months to March, while they declined in 23 locations and were unchanged in 13.

That suggests both prices and rents were tending to rise at a similar pace, creating a stable outlook for the gross rental income streams from residential property.

However compared to cash investments such as term deposits, the fairly modest rental returns from residential property investment are looking more attractive.

In Auckland, where house prices had traditionally been high compared to the rents they can achieve reducing their rental yields, indicative yields ranged from 3.5% in the inner-west suburb of Avondale, to 4.6% in Papakura and Pukekohe on the city’s southern flank.

Indicative yields were slightly higher in the Wellington region (4.2% to 5.0%) and in Christchurch (5.2% to 6.1%).

The highest indicative yield of all 56 locations monitored was in the Taranaki district of Waitara-Inglewood at 7.0%, which was up from 6.3% for the six months to March. The lowest indicative yield was in the Auckland suburb of Avondale at 3.5%.

The table below shows the movements in the indicative rental yields in in all 56 locations monitored over the last two years.

A more comprehensive table going back to September 2014 is available here.


Indicative gross rental yields for three bedroom houses in 56 selected areas with high rental activity during the previous six months. Based on REINZ lower quartile selling prices and median rents recorded by Tenancy Services’ Bonds Centre in each area over the previous six months.
  Indicative gross residential rental yields for the six months ending:
Town/region  Yield % June 2020  Yield % March 2020 Yield % Dec 2019 Yield % Sept 2019 Yield % June 2019 Yield % March 2019 Yield % Dec 2018 Yield % Sept 2018 Yield % June 2018
Whangarei:                  
Kamo/Tikipunga/Kensington 5.2 5.3 5.4 5.5 5.3 5.3 5.5 5.5 5.5
                   
Rodney – Orewa/Whangaparaoa 4.1 4.0 4.1 4.2 4.2 4.2 4.1 3.9 4.0
                   
North Shore:                  
Beach Haven/Birkdale 3.8 3.9 4.1 4.2 4.1 3.8 3.8 3.9 3.9
Torbay 3.8 3.9 3.9 4.0 4.0 3.8 3.9 3.9 3.7
                   
Waitakere:                  
Glen Eden 4.1 4.0 4.2 4.3 4.3 4.0 4.1 4.1 3.9
Massey/Royal Heights 4.1 4.2 4.3 4.3 4.3 4.0 4.0 4.0 4.2
Henderson 4.0 4.3 4.4 4.6 4.4 4.1 4.2 4.1 4.1
                   
Central Auckland:                  
Avondale 3.5 3.7 4.2 4.3 4.2 3.9 3.9 4.1 4.0
                   
Manukau:                  
Highland Park 3.6 3.4 3.4 3.5 3.8 3.4 3.3 3.3 3.6
Papakura/Drury/Karaka 4.6 4.6 4.7 4.7 4.8 5.1 5.0 4.9 4.7
Franklin – Pukekohe/Tuakau 4.6 4.5 4.4 4.5 4.6 4.7 4.6 4.5 4.6
                   
Hamilton:                  
Deanwell/Melville/Fitzroy 4.6 4.7 4.9 5.0 5.0 4.9 4.9 5.1 5.1
Fairfield/Fairview Downs 4.9 4.9 4.8 4.9 4.7 4.4 4.4 4.8 4.7
Te Kowhai/St Andrews/ Queenswood 4.3 4.2 4.3 4.6 4.5 4.6 4.7 4.7 4.7
                   
Cambridge/Leamington 4.3 4.4 4.3 4.5 4.4 4.4 4.5 4.6 4.6
                   
Te Awamutu 4.3 4.9 5.1 5.0 4.9 4.9 4.9 5.1 5.0
                   
Tauranga:                  
Tauranga Central/Greerton 4.7 4.6 4.6 4.5 4.8 5.5 5.1 4.9 4.8
Bethlehem/Otumoetai 4.4 4.2 4.1 4.3 4.2 3.7 4.0 4.2 4.2
Mt Maunganui 4.3 4.3 4.1 4.2 4.4 4.6 4.5 4.6 4.6
Pyes Pa/Welcome Bay 4.5 4.5 4.7 4.5 4.7 4.8 4.7 4.5 4.6
Kaimai/Te Puke 4.8 5.1 5.3 5.2 5.3 5.0 5.1 5.1 4.8
                   
Whakatane 5.3 5.2 5.5 5.7 5.4 5.7 5.9 5.8 6.1
                   
Rotorua:                  
Holdens Bay/Owhata/Ngapuna 6.7 6.8 6.3 6.1 6.5 6.1 6.3 7.0 7.8
Kuirau/Hillcrest/Glenholm 5.8 4.9 4.9 5.4 6.0 4.9 4.9 5.5 5.4
Ngongotaha/Pleasant Heights/Koutu 6.2 6.0 5.9 5.5 6.0 6.1 6.5 6.7 6.0
                   
Hastings – Flaxmere 5.9 6.1 6.3 7.0 7.9 8.2 8.3 8.4 9.2
                   
Napier – Taradale 4.3 4.3 4.7 4.5 4.6 5.0 5.1 4.9 4.7
                   
Taranaki:                  
New Plymouth Central/Moturoa 5.0 4.6 5.4 5.5 4.7 5.3 5.1 4.6 4.8
Waitara/Inglewood 7.0 6.3 6.3 7.7 6.7 7.6 7.4 6.6 6.5
                   
Whanganui 6.8 7.0 7.4 7.6 7.8 8.1 8.2 8.5 9.0
                   
Palmerston North:                  
Kelvin Grove/Roslyn 5.3 5.4 5.2 5.3 5.7 5.6 5.7 5.9 6.2
Palmerston North Central 4.4 4.9 4.7 4.8 5.3 5.3 5.2 5.1 5.1
Takaro/Cloverlea/Milson 5.1 5.1 5.2 5.5 5.6 5.6 5.7 5.8 6.1
                   
Kapiti Coast:                  
Paraparaumu/Raumati 4.6 4.5 4.5 4.7 4.8 4.5 4.8 5.2 5.0
Waikanae/Otaki 4.2 4.3 4.5 4.4 4.7 4.5 4.4 4.5 4.5
                   
Upper Hutt:                  
Heretaunga/Silverstream 4,7 4.7 5.2 5.1 5.1 4.9 5.0 4.9 4.9
Totara Park/Maoribank/Te Marua 5.0 5.3 5.0 5.2 5.3 5.2 5.3 5.6 5.6
                   
Lower Hutt:                  
Epuni/Avalon 4.7 4.4 4.7 4.9 4.8 5.2 5.1 4.5 4.7
Taita/Naenae 4.9 4.9 5.3 5.3 5.0 5.4 5.5 5.4 5.5
Wainuiomata 5.0 5.0 5.1 5.3 5.3 5.5 5.5 5.3 5.6
                   
Wellington:                  
Johnsonville/Newlands 4.7 5.0 4.7 4.7 4.7 4.9 5.1 5.0 4.9
Vogeltown/Berhampore/Newtown 4.4 4.3 5.0 5.0 5.0 4.6 4.4 4.3 5.0
                   
Tasman:                  
Motueka 3.9 4.3 4.0 4.0 4.2 4.3 4.4 4.3 4.2
Richmond/Wakefield/Brightwater 4.3 4.3 4.3 4.3 4.5 4.4 4.3 4.3 4.5
                   
Nelson – Stoke/Nayland/Tahunanui 4,6 4.5 4.7 4.7 4.7 4.6 4.5 4.7 4.8
                   
Blenheim 5.2 5.1 5.6 5.5 5.3 5.3 5.3 5.4 5.7
                   
Christchurch:                  
Hornby/Islington/Hei Hei 5.8 5.9 5.8 5.8 5.8 5.9 5.8 6.0 5.9
Riccarton 5.2 4.4 4.3 4.4 5.9 5.2 5.1 5.6 5.6
Woolston/Opawa 6.1 6.3 6.6 6.4 6.4 6.5 7.1 7.2 7.4
                   
Ashburton 5.5 7.3 7.5 6.3 5.7 5.8 6.3 6.3 5.2
                   
Timaru 5.6 5.6 5.7 5.8 6.0 6.1 6.1 5.8 5.6
                   
Queenstown/Frankton/Arrowtown 4.0 4.0 3.7 4.0 4.2 4.0 4.1 4.3 4.2
                   
Dunedin:                  
Kenmure/Mornington 4.8 4.6 4.7 5.2 5.3 5.1 5.5 5.7 6.2
Mosgiel 4.7 4.8 5.0 5.2 5.3 5.2 5.3 5.5 5.8
South Dunedin/St Kilda 5.5 5.4 5.7 6.2 6.5 6.9 6.4 6.8 7.3
                   
Invercargill 6.6 6.6 6.7 7.1 7.0 7.2 7.7 8.3 8.2

Source: Base data from REINZ / MBIE

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