Whanganui is "hotter than Auckland right now" with the city's rental property yield "off the chart" compared with the rest of New Zealand.
That's the verdict of Kiwibank's inaugural regional scorecard developed by the bank's chief economist Jarrod Kerr and senior economist Jeremy Couchman.
With a rental yield of 9 per cent, Whanganui is streets ahead of the rest of regional New Zealand and also higher than the Auckland average, making it attractive to property investors.
The Kiwibank economists describe it as "off the chart". Yield calculations are worked out by dividing the annual rental income on a property by how much it cost to buy.
The Reserve Bank's loan-to-value ratio (LVR) on investor-related lending may have forced investors to look at cheaper property, with a deposit going a lot further in the regions than it would in Auckland, the report says.
The economists recently visited regional centres to gather anecdotal evidence of what a region "feels like" to add to the hard data in the regional scorecard.
"We feel the regions are developing rather well. Capacity constraints are common complaints. Uncertainty around political policies plague confidence, but many business face growing pains, rather than contractions."
They found that housing market activity had gradually recovered from the lows seen in mid-2017, but remained subdued.
"Sales activity quietened quickly across New Zealand in 2017, but a few regions have experienced a decent recovery.
"The 'hot' areas right now include parts of Gisborne, Rotorua, the Hawke's Bay, and Manawatū-Whanganui. And we confirmed the feverish feeling on the ground with shortened times spent on market.
"There's been a flood of interest from northerners (Aucklanders) on a southern pilgrimage. House price growth reached 13 per cent in May in Manawatū-Whanganui, on par with the rate seen July last year."