After an unsettled few months (and some hair-raising headlines), the property market seems to be stabilising.
Auckland’s rental market reached new records early this year, with median weekly rent up 3.8% year-on-year in January to $540. The North Shore has reached a particularly high peak of $585 per week, and Franklin rents are soaring at $500 per week.
There’s no dampening of demand on the tenancy side either, with interest remaining strong particularly across the inner city. It’s reported that one two-bedroom property in Mount Eden attracted almost a hundred enquiries in just 48 hours!
If you’re looking to be one of the winners in this cooler market, you’ll need to look strategically at which areas are currently experiencing strong rental yields. Then potentially weigh this up against mortgage costs and likely capital gains depending on your long-term strategy. South Auckland has seen some of the strongest growth in capital gains over the past three years – for example, 2-bedroom apartments in Otahuhu have increased in value by nearly 35%.
However, in terms of rental yields, areas close to the CBD are currently delivering the strongest numbers by far. Given the rapid price spikes we’ve seen across the Auckland region in the past few years, it’s unsurprising that the central city – dominated by more affordable apartments – has performed well in terms of sales. But when you do the maths on rental returns, it’s even more clear why the big city market’s drawing big crowds.
Auckland’s top suburbs for rental yields*:
As well as being an affordable investment option, the dominance of apartment sales also reflects the changing trends of the times. While the Kiwi ‘quarter acre dream’ remains the gold standard, Aucklanders’ shifting work and leisure habits – paired with the influx of people relocating to the city – has meant stronger interest in apartment living than ever before.
While apartments are often genuine bargain buys, there are things to think about carefully before signing on the dotted line. Apartments (and in particular, leasehold apartments) typically offer less in the way of capital gains comparative to standalone properties. It pays to add up the numbers carefully – increased costs in the form of land lease and body corporate fees can take a sizeable portion of your yearly return. How much of this can realistically be passed on in rental charges? It’s also vital to do your homework on the building’s watertightness history and know exactly what you’re getting for your money.
While there’s a definite average price hike between apartments and standalones, investors looking for a quick turnaround with good growth may well be better off buying into a higher-value area such as Newmarket. Prices are expected to rise in most areas over time, but these remain highly desirable suburbs – and with tenants lining up, properties are unlikely to stay empty for long.
Some other central and city fringe suburbs have also performed strongly – most notably Grafton, Eden Terrace, Newmarket, Avondale, Mt Wellington, Waterview and Mt Roskill. While these locations vary wildly, there’s more common ground than you might think. Demand for rentals and market rents are always higher in places with shorter travel times and access to main transport routes. Rising rents in Mr Roskill and Waterview are likely linked to shortened travel times delivered by the new Waterview Tunnel, and this shows the importance of considering local amenities and the logistics of getting around. With travel times lengthening and congestion becoming an all-day affair, people are increasingly looking to minimise the pain of the daily commute – and they’re prepared to pay for it.
There’s some debate over which suburbs will be the ‘next big thing’ in rental investment. But one thing seems to be universally agreed upon – Auckland’s never been more attractive, and the people are just going to keep coming.
So wherever you choose to buy – and whatever your long-term strategy – as long as you do your homework and choose your tenants wisely, it’s likely your rental investment will be safe as houses.
Majestic pioneering homestead with secret British Imperial naval history placed on the market for sale