Provincial hotspots lead the way on prices and yields. Regional New Zealand is taking the lead as the rental market shows signs of new life with rental prices reaching all-time highs in several areas, new figures show.
The national average rental price lifted 5 percent, from $454 to $499 per week, in the year to June 2018, according to the latest rental market report from realestate.co.nz. With rental prices falling in Auckland between May and June, much of the national lift in rentals recorded over the past year has been driven by the regions.
Central Otago’s average rental price leapt ahead by 18.1 percent, from $559 a year ago to a record high of $660 – widening the gap between its average rental prices and those of Auckland ($598), which has now stretched to over $60 per week.
Other major rises included the West Coast (from $240 to a record $277, up 15.3 percent) and Wellington ($456 to $524, up 15.0 percent). In the Coromandel an increase of 122 percent to $749 was recorded, though the researchers caution that this figure may have been inflated by misclassified listings.
Other regions to record all-time high average rents include Otago ($455), Waikato ($396) and Northland ($403)
Vanessa Taylor of realestate.co.nz says movements in house and rental prices are generally following “a typical supply and demand scenario”.
“What we tend to see is that in the areas where house prices have increased, rental prices will follow suit,” she says.
So how much better off are regional property investors, and what are the top spots nationally for those seeking a return from investing and renting out homes?
A look at rental yields – a measure of a property’s annual rent as a percentage of its purchase price – suggests the market has started to turn in favour of investors seeking rental returns from residential property. Gross rental yields have started to rise in many areas – and again this is being led by the regions.
Data from REINZ and the Ministry of Business, Innovation and Employment on lower quartile selling prices and median rents for three-bedroom houses in the six months to June, points to six national hotspots where gross rental yields now sit above 7 percent.
Flaxmere in Hastings leads the pack with a yield of 9.2 percent, albeit that this is down slightly from an even higher 9.3 percent a year earlier.
Whanganui comes a close second with 9.0 percent, up from 8.6 percent a year ago; followed by Invercargill (8.2 percent, down from 8.3 percent); Rotorua’s Holdens Bay/Owhatu/Ngapuna (7.8 percent, down from 10.5 percent); Woolston/Opawa in Christchurch (7.4 percent, up from 6.0 percent); and South Dunedin/St Kilda (7.3 percent, down from 8.0 percent).
Daniel Coulson, Bayleys chief auctioneer and national residential manager, says the figures are consistent with the positivity he is seeing among many property investors in the regions.
“As rents rise faster than property prices in a number of locations across New Zealand the upbeat mood reflects an improvement in the fundamentals for investing in residential property.
“What we’re seeing is a number of hotspots emerging across both the North and South islands, where rental property is stacking up as a pretty attractive investment proposition for would-be landlords – largely off the back of improving regional rental yields.”