Top areas to invest revealed

Lindsay Richards, a Tauranga property investor, has more than a dozen rental properties but favours the Brookfield area. Photo/George Novak

Gate Pa, Bellevue, Judea and Welcome Bay are the best suburbs for Tauranga property investors to buy into, according to a report released today.

The Westpac Property Investor Report found the four areas delivered the best all-round rental returns in Tauranga and Mount Maunganui as they were among the top seven suburbs in terms of capital gain and gross yield.

Parkvale had the area's highest gross yield for a three-bedroom house at 6.8 per cent. Gross yield was the area's median rent as a percentage of the area's average property value and meant more cash coming in compared to the value of the house.

It was the 10th-highest gross yield in the country, beaten only by suburbs in Dunedin and Wellington.

Brookfield had the city's highest capital gain for a three-bedroom home at 3.3 per cent. Capital gain was the average increase in the estimated value of properties in the area and meant more money could be made when the property was sold.

Outside Auckland and Christchurch, Brookfield was fifth in terms of capital gain.

Fulltime investor and secretary of the Tauranga Property Investor's Association Lindsay Richards said his experience lined up with the report's findings.

He owns more than a dozen rental properties between Tauranga an Rotorua but said his preference was the Brookfield area.

"It's a solid area with lots of schools and supermarkets and an average standard of housing. It's secure," he said. "Brookfield is a good, solid bread-and-butter area that still produces a good return."

The figures reflected the reality that lower socio-economic areas produced a better return, but a lower capital gain was only one of the problems that accompanied those properties, Mr Richards said.

"There is a downside to investing in a higher gross yield or lower socio-economic area and that is that you have a harder time getting good tenants and more maintenance costs."

Tauranga Harcourts managing director Simon Martin said the results were a good reflection of the market: "The cheaper areas do have the better return and that's always been the case. Often the ones that have the best capital gain are in a more expensive area so your gross yield is not going to be as good."

Realty Services chief executive Ross Stanway said good tenants usually wanted three to four bedrooms, a garage with internal access, a warm, well-built house and access to schools, workplaces and public transport, and were often found in the areas listed in the study.

Mr Stanway said there were more opportunities now for investors as first-home buyers struggled to scrape together a 20 per cent deposit.

Westpac retail bank general manager Ian Blair said investors must realise investing for yield and capital gain required different strategies.