What’s a good rental yield in Auckland?

Investors always ask: “What’s a good yield in today’s market?”

When you see it asked online, most people respond: “Well, it depends.”

It depends on your strategy. It depends on where you buy it. It depends on what you buy.

It’s not a straightforward answer.

But as a property investor, you still want an answer.

Here at Opes Partners we want investors to be as informed as possible. That’s why we searched out the data. That way you can make an informed decision with your investment properties.

In this article you’ll learn what a good rental yield looks like in Auckland.

Quick facts:

• Here at Opes, we aim for a 4-4.6% gross yield, for a growth property in Auckland.
• For a yield property, you want to aim for a yield of 5.5-6.3% in Auckland.
• The median yield in Auckland is 3.22%
• The median yield in New Zealand is 4.52%
• Over time yields have been falling. This happens because prices have been increasing faster than rents.

What should my gross yield be in Auckland?

The median yield investors are willing to accept in Auckland is 3.22%, which is 1.3% lower than the country’s median.

As you can see, Auckland properties have lower yields than properties in the rest of the country.

But some properties fetch a lower yield; 25% of properties rent for 2.63% or below.

On the other hand, 25% of properties have a gross yield of 3.93% or more.

If you get a 4%+ gross yield in Auckland, you should be happy. You’re in the top 25%.

But, of course, it depends on the property type too.

While a gross yield of 4% is good for a growth property, like a townhouse, a 4.5% gross yield for a yield property would be pretty poor.

Here at Opes Partners we aim for a 4-4.6% gross yield for growth properties (houses and townhouses).

We then aim for a 5.5-6.3% gross yield for yield properties (dual-key apartments). These sort of properties earn a higher rental yield but don’t go up in value as fast.

Where do these numbers come from?

To get these numbers, the team at Opes hired someone to get data from Trade Me and OneRoof.

The Trade Me listings show what properties are renting for. We then match that with OneRoof data to see what those properties are worth.

This shows us the gross yield property investors are actually willing to accept. We then did this for every property on Trade Me.

For instance, here is a property available for rent at the time we did the analysis:

It’s a 3-bed New Build townhouse in Wellington, and it’s available to rent for $800 a week.

Then, we cross-referenced this with OneRoof’s estimated valuation.

And in this instance, this property is estimated to be worth $920,000, giving it a gross yield of 4.52%. Bang on average for the country.

We then use a computer to do this over 7,000 times.

After cleaning up the data, we’ve now got figures no-one else has.

More from Opes:

• What's a good gross yield in New Zealand? (Article)
• What's a good gross yield in Christchurch? (Article)
• What's a good gross yield in Wellington? (Article)

Why are these numbers so low?

If you follow a lot of property investors on social media, you might think: “Why are these numbers so low? The numbers I see online are higher.”

Some investors calculate their gross yield using the price they paid 10 years ago, not what that property is worth today.

When you calculate the gross yield you should always use the value of the property today. What you spent isn’t relevant, because you could always sell your property and do something else with the money.

This is an important point.

Are gross yields going up or down?

Auckland yields have been steadily declining. In 1993 they were about 6.6%. Today (using another calculation) they are closer to 3.3%.

The reason is that property prices have been increasing more than 7% per year. At the same time, rents have increased at about 4-5% per year.

Since property prices are rising faster than rents, yields have declined.

This is important. Investors need to be cautious when reading older material that mentions specific yields. What was a realistic yield 5 years ago may be unachievable in today's market.

What is a good gross yield?

Here at Opes, we aim for 4-4.6% gross yield for a growth property in Auckland.

For a yield property, you’d want to aim for a yield of 5.5% to 6.3% (in Auckland).

This is slightly lower than in some other parts of the country. However, property prices have historically increased faster in Auckland.

For some investors this makes up for the lower rental yields.

Other tools at your disposal

This graph is a great initial indicator for what yields other investors are accepting in your district of interest.

But once you get down to looking at a single property you are interested in, you’re going to want a more specific answer to your yield queries.

For a more comprehensive look at the Return On Investment (ROI) of the property you’re looking into, use these free tools:

• Return on Investment (ROI) spreadsheet

Use this handy spreadsheet to measure the amount of return on investment versus the cost of that investment.

• Rental yield calculator

Head to this page for a more comprehensive dive into the different types of yields (e.g. net and gross), how they are calculated and how this information can best inform you as a property investor.