Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Opportunity For Property Investors As Gross Rental Yield Measures Up To Mortgage Interest Rates

The average Auckland rental property is now delivering a gross yield above most mortgage interest rates, presenting an appealing opportunity for those considering investing in a rental property or expanding their portfolio.

“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,” says Kiri Barfoot from Barfoot & Thompson

“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 3-bedroom* tenancies to the average price of 3-bed homes sold by the company over the past six months. So, with the average rental price for a 3-bed Auckland home at $584 per week, or $30,368 a year, and the average 3-bed sale price over the past six months at $938,688, the gross yield is 3.27%.

The average gross yield has recently been as high as 3.47% (November 2019), however, recent increases in residential sale prices have seen the figure edge slightly lower.

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

She said it could also be a strong signal to investors as mortgage interest rates were expected by many to remain low for some time.

And while the rent freeze was still in place for existing tenancies, Ms Barfoot says the average price for newly rented properties not subject to the freeze indicated modest growth in many areas of the city.

“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 gross rental yield by suburb over recent years, the more southern, western and northern areas of the city tended to perform best. “At a suburb level, nearly 60 Auckland locations are delivering gross yield above 3.00%, and twelve above 4.00%, with suburbs south of Auckland city making up the bulk of these.”

Reviewing data kept since March 2015, the average gross yield has been as low as 2.85% in late 2016 - when average mortgage rates were approximately 5.60% floating or 5.10% fixed for two years, and as high as 3.54% in March 2015 - when average mortgage rates were approximately 6.60% floating or 6.00% fixed for two years.** Currently, some of the lowest advertised rates by the major banks are 2.69% fixed for two years.

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

See more about how to calculate return on investment here: https://www.barfoot.co.nz/landlords/help-and-tips/return-on-investment

*Three-bedroom properties make up the most significant portion of Barfoot & Thompson’s portfolio of approximately 17,000 rental properties, and so have been chosen as the standard example for the ‘typical’ Auckland rental.

**Historic interest rate data sourced from https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-mortgage-rates.

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Transport: International Arrivals In May Lowest In 61 Years

The number of people that arrived in New Zealand in May 2020 was the lowest for any month since May 1959, because of COVID-19-related border and travel restrictions, Stats NZ said today. There were 5,600 arrivals in May 2020 compared with 4,700 in ... More>>

ALSO:

It’s All In The Genomes: New Study Reveals Scale Of Havelock North Campylobacteriosis Outbreak

When the campylobacteria outbreak hit Havelock North in 2016, no-one fully understood how widely it affected the local communities. Gene-sequencing technology used by scientists has shown the true scale of the outbreak. The joint study from ESR, Massey ... More>>

ALSO:

Tiwai Point: Rio Tinto Announces Plans To Close Tiwai Point Smelter

Rio Tinto has just announced that it will wind down New Zealand Aluminium Smelters - the Tiwai Point smelter - saying the business is no longer viable. More>>

ALSO:

Freight: New Report On Auckland Port Relocation

The Government has released a major new report on the options for relocating the Port of Auckland’s freight operations while deferring any decision on the issue. More>>

ALSO:

Energy Sector: Meridian Spilled Water To Hike Electricity Prices - Authority Ruling

The Electricity Authority has found that generator Meridian Energy manipulated the power market, costing consumers about $80 million. More>>

ALSO:

XE Data Update: RBNZ Official Cash Rate Decision

The RBNZ will keep the Official Cash Rate (OCR) at 0.25%. T he key points in the RBNZ statement are: RBNZ keeps the OCR unchanged at 0.25% Maintain the LSAP (large scale asset purchase) at NZD$60 billion. Committee prepared to use additional monetary ... More>>

ALSO:

Electricity: Kiwis Ignore Promise Of Cheaper Power

Electric Kiwi and Flick Electric Co are joint winners of Canstar Blue’s award for Most Satisfied Customers | Electricity Providers From putting on an extra layer – rather than turning on a heater – to turning off lights and choosing the energy-saving ... More>>

ALSO:


ASB: Regional Economic Scoreboard Q1 2020

ASB NZ Regional Economic Scoreboard Gisborne still the place to be It has been Gisborne’s year, and the region comes out tops on our regional rankings for the fourth successive quarter. Like everywhere, question marks are about the COVID-19 impact on the future. ... More>>

RNZ: Economic Activity And Business Confidence Bouncing Back

Two surveys from ANZ show business confidence and economic activity have rebounded, but uncertainty about the future remains extreme. More>>

ALSO:

NIWA: The Climate Record That Keeps Getting Broken

Among the multitude of New Zealand climate statistics there is one record that continues to be broken month after month. Since January 2017 there has not been one month that recorded a below average nationwide temperature, according to NIWA’s seven station ... More>>

ALSO:

Govt: Extended Loan Scheme Keeps Business Afloat

Small businesses are getting greater certainty about access to finance with an extension to the interest-free cashflow loan scheme to the end of the year. The Small Business Cashflow Loan Scheme has already been extended once, to 24 July. Revenue and Small ... More>>

ALSO:

Science: 2019 Prime Minister’s Science Prizes Announced

The 2019 Prime Minister’s Science Prizes have been announced in a digital livestream event today. The Prizes recognise the impact of science on New Zealanders’ lives, celebrate the achievements of current scientists and encourage scientists of the ... More>>

ALSO:

Stardome Observatory: Young Kiwi Astro-Photographer Shoots For The Stars

Matariki by Josh Kirkley. The stars are aligning for up-and-coming Auckland-based astro-photographer Josh Kirkley (Kāi Tahu). During lockdown, one of his images was picked up by NASA and shared on the space agency’s Instagram to its 59.2 million ... More>>


DCANZ: Time For EU To Commit To A Level Playing Field For Trade

The Dairy Companies Association of New Zealand (DCANZ) has welcomed New Zealand Trade Minister David Parker’s statement that it is unacceptable for New Zealand exporters to continue facing an ‘unlevel playing field’ in the EU. Details leaked ... More>>

ALSO:

New Zealand Government: Supporting Kiwi Businesses To Resolve Rent Disputes

The Government will legislate to ensure businesses that suffered as a result of the COVID-19 response will get help to resolve disputes over commercial rent issues, Justice Minister Andrew Little announced today. More>>

ALSO: