Harder to get good returns on city rentals

A year ago, I looked at rental yields for investment properties in Auckland as it was becoming more common for those who couldn't afford to buy a first home to consider a rental property instead.

Home values in the Super City region have increased by 20.4 per cent over the past year to $874,851, thus I thought it would be interesting to see how the average hike of $148,224 for a residential property has affected rental yields across the city.

This time last year I reported rents had remained relatively static over the previous two years and though we have seen rents rise an average 5.9 per cent this year that's well below house-price rises.

A year ago, finding a rental investment property in Auckland that didn't require a large top up for the mortgage every month was difficult -- now it is a lot harder. However, many people seem to be happy to invest for capital gain alone or look to find home-and-income properties that offer extra income to help meet mortgage repayments or increase rental yields.

What has become more popular over the past year is buying property with development potential for land banking or on-selling property for a quick gain. High levels of speculation are evident in the Auckland market.

QV stats show that more than 2000 properties have been bought and sold more than once over the past 12 months -- some multiple times.

The highest average rental yields in Auckland tend to be in central areas in the apartment market. However, apartments are selling like hot cakes and have been rising in value, so yields will be decreasing sharply. Average yields in the apartment market in the central city and also in Newton/Grafton can still be found at about 7 per cent, which though lower than they were last year are still quite good. However, these figures are based on the average QV.co.nz e-valuer and the average rent. So when considering returns on an apartment or unit you also need to factor in annual body corporate fees, along with maintenance, mortgage interest repayments, insurance and rates that need to be factored into all rentals. Here then are the best areas for rental yields:

• Ranui: 4 per cent.

• Central Manukau apartments: 7.3 per cent.

• Beachhaven/Birkdale: 4 per cent.

• Orewa: 4 per cent.

If you can't afford Auckland, you could also consider looking at buying a rental somewhere else in the country.

After November 1, when you will require a 30 per cent deposit to buy a second property in the Super City region, this option will be more attractive as you will still need only a 20 per cent deposit to purchase elsewhere.

You can analyse rental yields and property values for suburbs and regions around Auckland and across New Zealand at www.qv.co.nz/resources/property-investment-rental-analysis and use the rental calculator also on the website.