Auckland rental yields falling as prices push higher

Posted by Dynon on June 9, 2015

[Image: Better rental yields likely to be found in south and outskirts]

New data from Barfoot & Thompson indicates that average rental yields in Auckland have fallen significantly over the past two years.

Although average weekly rental prices are growing steadily, they’re not keeping pace with Auckland’s super-charged sale prices. Barfoot & Thompson’s April rental data is telling us that as Auckland’s house prices continue to march upwards, the city’s average gross yields are going the other way.

According to the figures, although the average price of a three-bedroom property has increased by 30 percent over the last two years, the average gross yield has decreased by 16 percent. In the most recently reported two months, the average gross yield has fallen from 3.97 percent in May 2013 to 3.33 percent in April.

But the picture isn’t a uniform one, as gross yields differ considerably in different parts of Auckland. The average yield in Epsom, for example, is currently 2.62 percent while in Clendon Park the average is currently 5.48 percent. Heading south or towards the city’s suburban extremities is likely to give one a better yield.

But ultimately, as much as location comes into it, it’s largely a question of timing: when an investor bought their property, and how long they hold onto it for. If and when Auckland’s property price frenzy runs out of puff and the upward advance of prices stalls, then yields are likely to improve.

Assuming that does happen, those with a long-term buy-and-hold strategy are likely to benefit.