Auckland ranked worst region of New Zealand to invest in property

Data released earlier this month showed COVID-19 had done nothing to stop house prices rising. Now there's more evidence property investors will emerge from the pandemic largely unscathed, with rental yields holding up despite a freeze on increases. 

The Real Estate Institute of New Zealand's (REINZ) latest Capital Gains and Rental Yields Report, released on Friday, shows only minor drops in yields to investors.

"With the introduction of a six-month rental freeze in March as a result of COVID-19, it's not surprising that yields fell for most parts of the country from a percentage perspective," said REINZ chief executive Bindi Norwell. 

"However, none of the falls were particularly dramatic suggesting that initial fears that yields would be significantly impacted by rising unemployment as a result of COVID-19 have been unfounded."

Combined with annual capital gains still in the double-digits for most regions, investors will be breathing a sigh of relief through their face masks. 

The best-performing region overall is Southland, with capital gains just shy of 20 percent and rental yields of 4.9 percent - down from 5.5 percent last year. 

"For Southland to continue to provide such positive gains for investors on both a capital gains and yield perspective means that the region is really ticking all the boxes from a strategic investment perspective," said Norwell, predicting prices will continue to go up.

"No doubt, the area will continue to remain on investors' radar going forward, particularly now that the 40 percent deposit requirement has been removed with the temporary withdrawal of LVRs and now that some of the major banks are offering investors the same lending terms as owner-occupiers."

West Coast had the best yields - 6.7 percent, down from 7.5 percent - and ranked sixth for capital gains, placing it second-equal overall with Gisborne, which saw prices rise 16.2 percent and yields only down slightly, from 4.9 percent to 4.6 percent. 

The biggest capital gains overall - 19.3 percent - were recorded in Hawke's Bay, but its rental yields came in 11th out of the 16 regions. 

"Despite COVID-19 bringing a significant portion of real estate activity to a halt in April, all regions across the country saw a solid uplift in capital gains for investors as a result of strong median prices increases," said Norwell.

Auckland was just one of three regions that didn't see prices go up more than 10 percent in the year to June - rising only 7.6 percent. The city - one of the most expensive in the country - also had the weakest rental yields at just 3.2 percent, overall coming in last place from an investor perspective.

Bindi Norwell.
Bindi Norwell. Photo credit: Newshub.

The report covers data up to June - REINZ data focused on just house prices released earlier this month shows since then, Auckland prices have shot up rapidly, achieving 16 percent year-on-year growth in August. 

"The only region in New Zealand that saw a slight increase in yields was Tasman, which saw a slight increase from 3.4 percent in June last year compared to 3.5 percent for the three months ending June this year," said Norwell.

"This is most likely because it's the region that has seen the largest increase in rental prices over the last 12 months."

How the regions rank

1. Southland 
2= Gisborne, West Coast 
4. Manawatu-Wanganui
5. Taranaki 
6. Hawke's Bay
7. Otago
8= Northland, Marlborough
10. Nelson
11. Canterbury
13. Waikato 
14= Tasman, Bay of Plenty
16. Auckland