Solid yields for central Auckland properties eclipsed by Hamilton lots.
The first round of investment properties featured in NAI Harcourts' Key Assets magazine has been auctioned, indicating Hamilton is achieving better yields than Auckland.
In Auckland three commercial properties in Ponsonby Rd's Three Lamps area sold for yields that were just under or over the 5 per cent mark.
Tenanted by an ASB Bank, a property at 309 Ponsonby Rd earning $201,000 a year in rent plus GST and outgoings sold for $4 million achieving a 5.025 per cent yield.
A second property at 305 Ponsonby Rd tenanted by Bayleys Real Estate Ltd & Encore Designer Seconds Ltd sold for $3.8 million. It generates $205,560 a year plus GST and outgoings with the sale representing a 5.4 per cent yield.
The third property at 307 Ponsonby Rd, tenanted by Juli Bridal for $50,000 a year plus GST and outgoings, sold for $1,050,000 representing a 4.76 per cent yield.
The properties were marketed by Tim Turner of NAI Harcourts North Shore and auctioned by Andrew North. Turner says splitting the units up meant they could appeal to buyers looking for properties under $5 million and, as a result, there was good bidding on all three. "After multiple bids on each, the three titles were sold to the same investor," he says.
Turner says in Auckland 5 to 7 per cent yields are typical, although this softens the higher the price goes.
By comparison, Mike Neale, the managing director of NAI Harcourts Hamilton Commercial, says investors should be looking south of Auckland if they want to achieve yields above 7 per cent or even as high as 10 per cent.
"Two Hamilton CBD investments featured in Key Assets illustrate this, selling at 7 per cent and 8.41 per cent yields," Neale says.
A property at the corner of London St and Victoria St, with a six-year lease to national brand Columbus Coffee and earning rent of $53,746 a year plus GST and outgoings, sold for $767,800 for a 7 per cent yield.
Another Hamilton city property at 801 Victoria St generating $25,675 annually plus GST and outgoings, sold for $305,000 for an 8.41 per cent yield.
Neale says Hamilton sits around 12 to 18 months behind Auckland in property market trends and the Waikato has not yet reached its heightened prices. Most yields are at about 7.5 to 9 per cent.
"At the moment we have some of the best investment stock we have had in the last five years, in terms of the quality of the buildings, tenants and length of leases. The numbers are just not making sense in Auckland for anyone looking for an investment in comparison to ... Hamilton."
However, there are exceptions, with some properties in Hamilton achieving record yields. Neale cites 404 Anglesea St, tenanted by Canon and earning $65,000 a year plus GST and outgoings on a new six-year lease which sold for $1,045,000 at a 6.2 per cent yield.
Neale says the prominent location, excellent international brand tenant and the fact it is within 200m of possibly more office space than anywhere else in Hamilton's CBD make this an exceptional property and, as such, it has achieved a higher price and lower yield.
NAI Harcourts general manager Michael Grainger says there are good opportunities in both Auckland and the Waikato.
He says the results show well-leased properties are sought after and are driving yields down, even with interest rates rising, particularly in the competitive Auckland market.
"Investors are prepared to pay more in Auckland due to limited supply. The Christchurch situation has also had an impact, with some investors pulling their money out of the city following the earthquakes and reinvesting in Auckland where there is deemed to be stability - another factor affecting yields."