City's yields analysed

Central Auckland offers the highest-yielding properties in the city, according to real estate agency Barfoot and Thompson.

Saturday, October 25th 2014, 12:00AM

by The Landlord

Its monthly suburb report compares rent, house prices and yield across the city.

The latest report found the average gross yield Auckland-wide was 3.63%, based on an average sale price for three-bedroom homes of $676,920 and an average rent per week for three-bedroom homes of $472.

But in central Auckland, three-bedroom homes net an average $901 per week for an average sale price of $602,475.

That may be skewed by the prevalence of apartments in the central city, pulling down the average sale price.

Clendon Park was the next-best yielding, with 6.23% and an average sale price of $310,650 and rent of $372. That was slightly up from the month before, when the suburb was yielding 6.14%.
It was followed by Manukau Central at 5.8% and Favona.

In the central, eastern and northern suburbs, the only areas yielding more than 4% were Albany, Birkenhead, Mt Wellington, Panmure and Avondale.

In the west, Sunnyvale was the best performer, with a 4.5% yield.

Sandringham was the lowest yielding of the suburbs surveyed, return 2.14% on an average sale price of $1.304 million and average rent of $534. Grey Lynn was close behind with an average sale price of $1.296 and rent of $634, giving a yield of 2.54%.

Property investor David Whitburn said cashflow was not something to be ignored.

“Whilst I acknowledge a significant number of investors don't have any debt, the majority do and interest rates are generally at least 2% over this average yield figure. There is pressure likely to be seen next year on interest rates to go up so cashflow is important to focus on. The truth ignored by many is that property investment is a balance of cashflow, equity and growth. If you just go for growth, unless you have outstanding personal cash-flow then you are in trouble when you seek your next loan approval.”

People who invested in older units in central Auckland with yields of less than 5% might have a flawed strategy, he said. “There are risks from the Unitary Plan which is likely to be in place in late 2016 which makes it much easier to have brand new, better built, warmer, dryer units which are easier to finance in light of being exempt from the LVR restrictions. Would you rather have an old unit that fundamentally looks ugly despite your best endeavours that your home-owner end buyer has to put four times the deposit into to purchase than a brand new one? Already a number of terraced houses and apartments are in the development supply pipeline to compete against these units.”

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