What is a good gross yield in New Zealand?

Property investors want to get a good rental return.

One way to measure this is by looking at the gross yield. This is the rent you get compared to your property’s current value.

In the past, there hasn’t been data showing the yields investors get in today’s market.

Sure, you can look at an area’s average rent and house price. But the average house might not be the average rental property.

Here at Opes Partners we want investors to be as informed as possible.

We looked at every rental property on Trade Me and matched the rent with the estimated value from OneRoof. This gives an estimated gross yield.

In this article, you’ll learn what a good gross yield is in New Zealand. That way you can make an informed decision with your investment properties.

Quick facts:

• The median yield in New Zealand is 4.52%

• The highest rental returns are in the South Island

What’s a good gross yield in New Zealand? 

The median property in New Zealand gets a 4.52% gross yield.

But, some properties have a lower gross yield. 25% of properties have a gross yield below 3.7%.

On the other hand, 25% of properties have a gross yield of 5.3% or above.

But most properties yield somewhere in the middle.

Some investors are surprised how low this is. If you read books written a decade ago, the yields mentioned are often a few percentage points higher. But this data is unique because it shows what’s happening in 2023.

It’s also important to note that the return an investor can get depends on where they invest. Some regions have higher rental returns than others.

The highest rental returns are in the South Island.

Southland has a median gross yield of 5.76%. Otago comes in second with a median gross yield of 5.65%.

Where are the highest gross yields within New Zealand?

This map shows which council areas have the highest and lowest gross yields.

The main centres have lower gross yields where property prices are high.

Smaller council areas tend to have higher gross yields. The differences are significant.

Kawerau District (highest yield area) has an average gross yield over 2x higher than Queenstown-Lakes (lower yield area).

The top 5 highest yielding areas in New Zealand are:

• Kawerau District – 7.23%
• Grey District – 7.16%
• Rangitikei District – 6.95%
• South Waikato District – 6.71%
• Ruapehu District – 6.27%

Less than 30,000 people live in each of these areas, and the average house sells for less than $400,000.

On the flip side, the lowest yielding areas in New Zealand tend to be in more expensive areas. The top 5 lowest yielding areas are:

• Mackenzie District – 2.72%
• Queenstown-Lakes District – 2.97%
• Thames-Coromandel District – 3.09%
• Central Otago District – 3.23%
• Auckland – 3.25%

Each of these areas has an average house price above $650,000.

It’s important to note there is significant variation around the country.

You’re more likely to find high gross yields in small towns, but not all small towns have high gross yields.

Mackenzie District is a small district with only 5,140 people living there, but it has the lowest average gross yields.

More from Opes:

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

Gross yields aren’t the only thing to look at

Gross yields aren’t the only thing to consider when investing in property.

Some investors we work with prefer to buy in main cities. Property values tend to go up more consistently in these areas, so investors often accept a lower yield to buy there.

Similarly, the highest yields are in smaller towns. But fewer people live in smaller towns, so it can take longer to find a tenant.

Where in a region do you tend to find higher gross yields?

So far we’ve looked at gross yields between council areas.

But a council area can include many towns and suburbs, so there can be a lot of variation within one region.

Here’s a Wellington map, showing the highest and lowest yielding suburbs.

What do you see? Generally, properties located in the CBD have higher gross yields.

As properties move away from the inner city, yields fall sharply. They then gradually increase again as properties move further out of town.

This trend is also seen in the Auckland, Christchurch and Hamilton property markets.

Why does that happen?

Properties in the centre of a city tend to be cheaper. They’re compact, and you’ll find more apartments and townhouses.

Even though they’re smaller, these properties get a good amount of rent.

Suburbs on the CBD’s perimeter tend to be more expensive. Those properties tend to be bigger and aren’t affordable for the average renter.

Most people who have the money to live in expensive suburbs can afford to buy their own home, so there is less tenant demand, which means softer rents.

Think Parnell in Auckland, Fendalton in Christchurch, or River Road in Hamilton. That’s why these suburbs have lower yields.

As properties move further out of town, yields pick up.

So where should I invest?

Property is a direct form of investment. When you buy a property, you’re not purchasing the whole area or district.

Instead, you’re buying one specific property within the region. And your particular property may earn a higher or lower yield based on many factors.

For instance, although Queenstown-Lakes has the lowest gross yields this doesn’t mean all properties in the area are low yielding.

There’s bound to be properties that earn extraordinarily high yields there.

Similarly, not every property in the Grey District will generate healthy returns. In fact, there will be some properties in the region that are low yielding and could cost you thousands.