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Home / New Zealand

Rental property: Poorest areas pay best returns

Anne Gibson
By Anne Gibson
Property Editor·NZ Herald·
24 Jun, 2013 05:30 PM3 mins to read

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David Whitburn.

David Whitburn.

Orakei and Devonport are a bad deal for new landlords paying prices which don't match the rents they can charge.

Tenants in Auckland's poorer areas pay less than those in more wealthy suburbs - but not relative to the value of the houses, figures show.

Data from Barfoot & Thompson shows about a $200-a-week difference between renting in Remuera compared to many parts of South Auckland.

Barfoot says Clendon Park in South Auckland is the city's best investment for a landlord because property prices are the lowest compared to relatively high rents: it has the highest annual rental yield of 7.4 per cent.

This is generated by an average sales price of $245,545 with a $349 a week average rent for a three-bedroom house, Barfoot says.

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David Whitburn, Auckland Property Investors Association president, said the data did not show a huge rent variation.

"People who live in lower-income areas are not paying a lot less than those in the higher-income areas," he said.

Manurewa's average sale price of $315,197 returns an average rent of $362 a week, standing alongside Otara houses selling for an average $281,389 but giving $353 a week rent.

Massey's $386,333 average sale price delivers $384 a week rents, Otahuhu's $375,614 average sale price generates $377 a week and Takanini's $356,959 average price yields $372 a week rents.

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Landlords get lower returns in the more expensive areas.

"At 2.3 per cent, Orakei, in the eastern suburbs has the lowest yield, an average sales price of $1,271,486, and an average rental of $569 a week," the agency said.

Devonport is also a bad deal for new landlords paying top prices for houses there but seeing very little money coming in: its average sale price is $1,056,429 but on average, a three-bedroom rental will return only an annual 2.9 per cent because of the $595 a week average rent.

Remuera is also pricey, with an average sale price of $1,122,813 yet a relatively low average rent of $607/week, giving a 2.8 per cent return.

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Milford's average sale price is $944,714 but its average weekly rent is $529, which gives a low 2.9 per cent yield. In Northland, Kerikeri's average sale price is $660,818 but average weekly rents are only $342.

Browns Bay sits in the middle, delivering a 4.5 per cent yield to landlords which is also Auckland's average yield: Browns Bay's average house sale price is $585,500 and average weekly rents for a three-bedroom house are $501 a week.

Mr Whitburn said rents could be changing soon, particularly in Auckland's more affordable areas.

He is worried about Reserve Bank mortgage restrictions and the effects on the rental market.

"If highly geared over-80 per cent loans are restricted, then I am concerned that this will hurt first-home owners and new investors who haven't saved up enough.

"This will not stop property cycles but will probably slow down Auckland house price growth and raise rents in the lower to mid-range house price levels, because fewer people will be able to finance their own homes," Mr Whitburn said.

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But foreign buyers will not be hit as hard because they have generally saved up more capital. Property managers Crockers found average Auckland rents had been stable and changed very little.

However, people pay about 35 per cent more to live in Auckland than elsewhere in New Zealand.

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