Tiny Te Teko, near coastal Whakatane (pictured), has emerged as the New Zealand town with the best rental returns. Photo / 123RF
If you are a house hunter looking to get the best rental return for your buck you'll need to go further afield than even before.
New figures showed parts of the Bay of Plenty, West Coast and Far North offering higher returns than the cities, with tiny Te Teko - about 20km from Whakatāne - the best in the country.
Median house prices in the small town of about 500 people were among the country's cheapest at $120,000, while the estimated weekly rent was high at $473, the data by analysts OneRoof-Valocity showed.
This gave investors a 19 per cent return based on 48 weeks' rental income and leaving four weeks' aside as a buffer for expenses.
For those wanting to buy in Auckland, the best returns at 6 per cent were in Central Auckland with its abundant apartments.
Whakatane mayor Tony Bonne said Te Teko was near to jobs in the boatbuilding, aquaculture, forestry, dairy and kiwifruit industries.
"There also aren't many rentals in Te Teko," he said.
"Local Te Tekoites - or Te Texas as they call it - own most homes and they don't sell often."
The latest data highlights how investors have pushed deeper and deeper into rural New Zealand in the hunt for a bargain.
During the recent property boom when house values were skyrocketing, investors could often buy properties and then quickly onsell them at much higher prices.
But as capital gain has slowed, rental returns have become more appealing.
Investors maximise their returns by buying homes as cheaply as possible in locations where they can be rented for a strong return.
The hunt for good returns and cheap houses has led investors to spread like a wave out from the major cities to the smaller cities and now rural New Zealand.
Check your suburb's valuation here on the OneRoof data interactive.
The 10 places with the best returns were now all in the countryside, the OneRoof-Valocity data showed.
After Te Teko, West Coast towns Dunollie, Runanga, and Reefton were strong performers with returns between 13 and 17per cent.
The Far North's Kaitaia and Kaikohe were also among the best with returns of 10 and just over 8 per cent.
Australian investor Craig Bavinton recently paid $350,000 for a 1950s-built Kaikohe home on an 1800sq m block that was returning a net 5.1 per cent.
He bought after researching New Zealand's weather and places for families and potential for future growth.
Northland showed up "well overall" on most measures with a road trip then helping him settle on Kaikohe because he liked the area.
Southland town Mataura was another top performer with 11 per cent returns.
Invercargill investor Angela Strang said the town was close to regional city Gore and woodchipping and dairy jobs but that many homes were run down and needed renovating.
James Wilson, director of valuation at property analysts Valocity, also offered a word of caution about investing in the small towns.
"These returns look healthy on paper," he said.
"But they may not have the major population growth and sustainable rental income underpinning them."
He said the push by investors to hunt through tiny towns did raise the question about where they could go next.
In Auckland, the city centre was offering the best returns because apartments could be picked up relatively cheaply and then rented out for good prices.
Apartment Specialists salesman Sovannara Meak there had been a stigma attached to small city apartments, referred to by some as shoeboxes. Yet these were some of the best performing.
He said he had a 23sq m studio apartment being listed this weekend for $319,000 at 76 Wakefield St.
It was currently being rented for $370 a week, but which could attract rents up to $400 a week for a 6 per cent net return.
And what a lot of people didn't realise was that these tiny apartments had actually doubled in price over the last seven to eight years because rents had been rising so fast, he said.