Every NZ Town Ranked By Rental Yield (Worst To Best)

We analysed 57,114 rental properties... to find the highest and lowest rental returns. In this episode, Ed and Andrew count down the five highest-yielding areas, then rank every city from worst to best. You'll learn: The five areas with New Zealand's highest rental yieldsWhy do the big cities consistently have the lowest yieldsThe catch with high-yield small towns, and why gross yield can misleadA high yield isn't the whole story. This episode shows you the trade-off, plus a free tool to see where your own property ranks. And you can check out the Rental Yield Percentile Calculator here https://property-yield-compare.replit.app/ For more from Opes Partners: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Sign up for the weekly Private Property newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.opespartners.co.nz/newsletter-sign-up⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Instagram⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.instagram.com/opes_partners/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TikTok⁠⁠⁠⁠⁠ https://www.tiktok.com/@opespartners

• 0:00Speaker 00

  Hello and welcome along to the Property Academy Podcast by Obus Partners. I'm your host, Seb at Night.

• 0:04Speaker 01

  And I'm Andrew Nichol.

• 0:05Speaker 00

  And this is a show that helps Kiwis go from zero to five investment properties. So you could be financially free and stick around for the next 15 minutes because you're going to learn every New Zealand city ranked by rental yield, worst to best. Do older houses get higher rental yields than newer ones? And how much your house makes compared to 57,000 other rental properties in New Zealand? And coming in at number five, with the fifth highest rental yield in New Zealand, is a little town called Dannyberg. It's a small town of 5,500 people in Tararua District, and it's halfway between Hawke's Bay and Wellington. Do you have any idea, other than that, where Dannyberg is?

• 0:45Speaker 01

  I would have thought that was someplace off the castle by the name of it.

• 0:50Speaker 00

  It's about 41 minutes to Palmerston North. The median gross yield there is 6.43%, which is pretty high, right? Like, and for anyone new to the show, what does, what does that term gross yield mean?

• 1:07Speaker 01

  Yeah, gross yield or yield, people mostly call it, but there is net yield as well. Basically, this is your total rent per annum divided by the value of the property.

• 1:16Speaker 00

  And that's just a way of trying to figure out, well, how much rent do you get compared to what it costs you to buy that house? Right? So what do the numbers look like in Tararua District?

• 1:25Speaker 01

  So the median rental property there is valued at $396,000. Now, the median rent is valued around 470 a week. So that gives you a gross yield of about 6%. So it's pretty strong again, but remember, the rental yield is not the only thing that you're going to look at when you're buying a rental property. Just getting a really great yield doesn't mean it's a great investment, but we'll come back to that.

• 1:48Speaker 00

  Now, these numbers are higher than what you might see online because often what happens, even on our own website, is they'll look at the average rent and the average priced property in a year, in an area. But you've got to remember that rental properties tend to be cheaper than the average property. And that's because if you had a $10 million property in Auckland, you're probably not going to rent that out. Somebody's going to buy that to live in it, whereas investors typically cluster or go after the cheaper properties because that's what renters can actually afford. And so what I've done is I found a way to look at 57,000 properties that actually rented over the last 12 months.

• 2:30Speaker 00

  I got the values for, or the estimated values for all 57,000 properties, found out what those properties were renting for, so that we can actually calculate, okay, what are the rental yields people are accepting? Now, you might remember I've done shows in the past where I've looked at that, but I was only able to find what was on Trade Me at the time. So I could only look at like 12,000 properties. Now I've found a way to look at it over an entire year. So it becomes way more robust because usually if I did that for Tararua District, there might only be 10 properties online. We've actually been able to look at 122 properties in this. So it is just like way more robust.

• 3:09Speaker 01

  Have you got Claude running around the darts of the internet for you?

• 3:13Speaker 00

  I, I, I have my ways, I have my ways. And what this has showed is that the average rental property around New Zealand earns a gross yield of like 4.6%. But some areas do get that high yield. Now, if we were to look at the fourth highest rental yields in the country, where do we find those?

• 3:31Speaker 01

  So that's Wanganui, so 6.5%. Now, this is a city with much larger population, 43,000 people. And the reason why Wanganui has got such a strong rental yield is that the property prices are pretty cheap. So the average rental property there is valued at $466,000, but it rents for $580 a week.

• 3:51Speaker 00

  But the other thing I wanted to find out as part of this is, do these towns get higher rental yields because their properties are older, right? And do you see that if you buy an older rental property, does it have a higher yield than say a newer property? And so I was able to figure that out. And what I found is that actually, if we look at all New Zealand older properties, so just all rental properties, older properties appear to have a slightly higher gross yield. So if we look at all of the properties built in the 1940s, the average gross yield is like 5%. If we come a little bit more recently, if we look at all of the properties built in 1990,

• 4:36Speaker 00

  the average gross yield is 4.55%. And then if we look at like those built in 2020, it's about the same, about 4.55%. But then as I was thinking about that, I was like, one of the things that we often say on the show, Andrew, is that if we look at smaller towns, typically the properties are a bit older. So is it that if you look nationwide, older properties, especially those built in the 40s, might appear to have a higher yield? But is that just because all of the properties built in the 1940s are in these small towns, which tend to have higher yields anyway, right? And so I found a way of actually being able to look at it.

• 5:16Speaker 01

  Oh, this is interesting.

• 5:18Speaker 00

  Well, firstly, if we compare, say Auckland to Palmerston North, what we see is, oh, they do have a surge in properties, in rental properties, that were built in the 40s and also in the 60s. Whereas if we look at Auckland, there have been a lot of properties that were built in the last three decades, right? So if we look at Auckland, about 14% of properties that were rented over the last year were built in the year 2000 to 2009. Compare that to Palmerston North, only 5% of their rental stock was built in that same 10-year period. And so the interesting thing there is for, for like years, we've said, oh yeah, smaller towns have older rental stock.

• 6:02Speaker 00

  And now I'm like, oh, I knew it was true, but now I can actually see that within the data. And what we find actually in Auckland is that the older the property, the lower the gross rental yield we have there.

• 6:15Speaker 01

  Well, that's interesting. So I've got an idea of why.

• 6:17Speaker 00

  Okay, why, why do you think it might be?

• 6:19Speaker 01

  I wonder whether or not, because people coming into Auckland, now there's a bit more competition with newer properties, they're going to those properties rather than the older ones.

• 6:29Speaker 00

  Well, it could be that. The other thing it could be is if a lot of older properties might be closer into the city centre, they might have slightly higher prices and so the rental yield would be, could be lower.

• 6:39Speaker 01

  Or maybe, maybe some of the older properties there are in some of those more established, expensive areas that you wouldn't necessarily buy as a rental today.

• 6:47Speaker 00

  That's, that's basically what I just said.

• 6:48Speaker 01

  Oh, okay.

• 6:49Speaker 00

  You were just saying it better. But what I would do, what you'd listen to is that interestingly, in Auckland, properties that were built in the 1930s, so rental properties, have a higher gross yield than those built in the 1910s. Those in the 1950s have a higher gross yield than the 1930s. And actually, the trend tends to be that once we get into the three most recent decades, we actually see slightly higher gross yields for the newer properties and the old properties. Isn't that funny? That is completely the opposite of what a lot of people would have thought we were going to say. Now, it's not always the case, like if we look in Palmerston North, some of their newer rental properties have lower gross yields than their earlier ones. But if you're investing in Auckland, perhaps it's not necessarily going to be true that an older property's got a higher gross yield. That'll, that'll surprise a few people.

• 7:34Speaker 00

  Look at this, seven years of the podcast, and we're still, we're still, we're still got new information.

• 7:39Speaker 01

  And actually, I do just want to talk about yield a little bit as, as well, because I don't want anyone to go out there and think, okay, well, all I need to do is focus on yield. Because again, that's just one part of what you might assess when you look at the numbers. Now, gross yield forgets about any of the costs with owning that property. So it doesn't include your rates or your maintenance or your insurance. And older properties, they will likely have more costs to running them. You're going to have more maintenance, there's going to be things wearing out. So let's run a scenario. So let's say you've got a rental property, half a million dollars built in the 1930s. So because it's older, you want to budget an appropriate amount of money for maintenance a year. Let's say you do two and a half grand for your maintenance budget per year.

• 8:20Speaker 01

  Now, compare that to a new property, you're probably only going to use kind of $500 for, for maintenance allocation per year. Now, that extra $2,000 that you're budgeting for maintenance every year on the older property, and again, you're not going to pay that every year, it could be for the, you know, replacing the roof in 10 years' time, that knocks about 0.4% off the yield. So if you buy an older property because you want to have that advantage of the higher yield, well, the difference is probably going to be wiped out by those extra costs.

• 8:52Speaker 00

  Yeah, okay. And that'd be if you were actually in a town where older properties did have an advantage, which isn't obviously the case. Okay, that's good to keep in mind. But if we are looking for those high rental yields, what comes in at number three on our list?

• 9:06Speaker 01

  So number three, and again, just focusing on the gross yield at the moment. So that's South Tarranaki, and that's got a gross yield of 7%. So that is massive.

• 9:16Speaker 00

  And I'm particularly happy because my, my hometown is the largest town there, right?

• 9:21Speaker 01

  Yeah, Hawera, where Ed's from, about 10,000 people, still pretty small farming town, with the largest dairy factory, as he tells me all the time, in the southern hemisphere.

• 9:31Speaker 00

  That's the one fact you should all know about Hawera.

• 9:33Speaker 01

  And Ed came from there, that's what they're known for.

• 9:36Speaker 00

  No, no, no, Ben Hurley comes from Hawera.

• 9:39Speaker 01

  Really?

• 9:39Speaker 00

  The comedian. No, no, no, he's much more famous than me.

• 9:41Speaker 01

  No, I know that.

• 9:45Speaker 01

  But you've got to be careful when we say, South Tarranaki's got an average gross yield of 7% because- South Taranaki is huge, right? It's a huge district and it could take you, I was surprised about this, an hour to drive from one end to the other to leave it. So I kind of think, well,

• 10:04Speaker 00

  why would you ever want to leave? A place like no other, that's, that's the tagline of Taranaki. Yeah, yeah, a place like no other. I'll tell you the funniest thing. I was on the South Taranaki Council website the other day and it said the second, second highest rated region in the world.

• 10:21Speaker 01

  Based on what?

• 10:21Speaker 00

  Like tourist destination. And I just thought, oh, how wonderful, we second best. I mean, it's really good for the region, right? But I did find it quite funny as well. And I think when you bring up the fact that some regions are quite large, right? And it might take you an hour to, to drive from one side to the other. You can't necessarily say, okay, South Taranaki, that's got an average gross yield of 7%. So if I buy the average property in Hawera, that's going to have an average gross yield of 7%. Because what you might find, and I actually built you a map, Andrew, to visualise this. So, so let me get, let me give you a tour of all the rental properties.

• 10:55Speaker 01

  This is your map?

• 10:55Speaker 00

  In the South Taranaki district. Yeah, I spent my weekend building this because I thought it was quite cool. And what we find is, okay, there are 239 rental properties in Hawera, but what about Normanby or Altham or up the coast in Okato? Because the smaller towns tend to have higher gross yields. What you might find is that those small towns bring up the South Taranaki average. And actually Hawera might be a little bit lower. Now, that is not always the case, but if I was to take you to a tiny wee town called Waverley, which is basically about as south as you get. Uh, what have we got in this analysis? Yeah, there's about seven rentals in there. You can see that this one over here had a gross yield of nine point. Yeah, about 10%.

• 11:38Speaker 00

  So that's, uh, um, you can read it on screen, but maybe I shouldn't read it out.

• 11:42Speaker 01

  Oh, okay.

• 11:44Speaker 00

  I wasn't going to read it out, but there we go.

• 11:45Speaker 01

  Oh, I thought you couldn't read it.

• 11:46Speaker 00

  No, I can read it, but I just wondered, I wondered about whoever owns that. So what you can do though is, is you should just validate it when you're looking at things like this and say, is that property really worth $308,000? So then you might Google that and go to Homestock and say, yeah, sure. Oh, actually it's worth $350,000. So you look at it and say, oh, okay, maybe there are some good, good rentals in Waverley. Maybe I should go look at that. Now, I'll just tell you something about Waverley though. I mean, it's the tiniest little town in the world. I'm not sure how long it would take you to find a bloody tenant. And, um, property prices there are obviously cheap for a reason. So I wouldn't necessarily rush there and go buy a rental. But I'm just trying to show you how you can use it. I'll show you something else that was quite, I was doing this before you walked in the door today, Andrew.

• 12:28Speaker 00

  As I looked at this property, you've always got to be a little bit careful when you're doing analysis like this, because it looks like this property has a 20% gross yield. This is, um, 15 Longview Drive in Hawera.

• 12:40Speaker 01

  Yeah.

• 12:40Speaker 00

  Um, but it's because it's getting 700 bucks a week and the estimated value is $176,000.

• 12:47Speaker 01

  Yeah, that doesn't seem right, does it?

• 12:48Speaker 00

  No, it's because when you actually Google it.

• 12:50Speaker 01

  Oh, it's the land.

• 12:51Speaker 00

  Yeah, so, so there's a, a couple of new properties being built in Harvard. It's still renting for 700 bucks a week apparently, or at least that's what they were advertising. But the current value might be based on the, the bit of dirt. Yeah, it just hasn't updated. So I always like to show people like the weaknesses in it as well. But anyway, that's, it's interesting to know that if you are looking at a large district, even like, um, Taradua and Danny Vug, the, the average yield for the area can be, uh, pulled up by some of those smaller towns that have higher yields as well. And you want to check your numbers before you invest.

• 13:25Speaker 01

  And again, we are focusing on yield today, but that is just one of the things that you want to consider.

• 13:29Speaker 00

  Now, if we switch back to the highest yielding areas, what comes in at number two?

• 13:34Speaker 01

  So, Rua Peahu, there's a gross yield of 7.23%.

• 13:38Speaker 00

  So that'd be towns like Tomarunui and Awakune.

• 13:42Speaker 01

  And again, you see that in a combination of small towns where you've got lower value rental properties, so a median value of 313,000, that's going to make that yield so much stronger.

• 13:52Speaker 00

  And that's where you do see a bit of a difference between the median rental and the median house. So if you look at the median house value, according to QV for Rua Peahu District, we're talking about $360,000 is the, the average value or median value for the area. The median rental is $313,000, so about $50,000 cheaper. So again, it's that idea that properties tend to be a little on the cheaper side. And one of the things that's important to understand is depending on where you buy a property can impact that rental yield. So if you're in Auckland, being like, oh, well, my rental property doesn't, doesn't, uh, earn a 7% yield. Well, that might be fine because you bought in Auckland because it typically has stronger capital growth and more consistent capital growth.

• 14:35Speaker 00

  And so what you care about is, well, how does your rental property compare to others in Auckland? And so of course I built you a calculator. And so what this lets you do is you can choose your area. So let's say I own a property in Christchurch. Um, if I'm really honest with myself, it rents for, uh, about $515 per week and it is worth $480,000. That means that it has a gross yield of 5.6%. And that is higher than 72% of rentals in Christchurch City.

• 15:08Speaker 01

  That's pretty good.

• 15:09Speaker 00

  Yeah, so I could, I mean, it's an apartment, so it's going to be high yield, but lower growth. But that means that if I'm like, oh, well, my property doesn't have a 7% gross yield like in South Taranaki. Well, no, but that might be because I deliberately bought in a city that had more people, more, um, more, uh, or better prospects in my mind for capital growth in the future. And also on top of that, more potential tenants who could move in. So I felt more comfortable with it. So I might feel bad that it doesn't hit 7%, but actually if I compare it to other rentals in my area, then I go, well, actually this is in the top half of rentals in the city. I can feel pretty good about that, at least from a rental yield, knowing that, you know, there are some, some cons to that as well, that it's probably not going to grow in value as fast

• 15:54Speaker 00

  because it's an apartment. And so this is a way for you guys to, to apply this analysis to your own properties to say, okay, well, how does your rental stack up to others in your area?

• 16:04Speaker 01

  Um, and also the, the thing about averages, again, we always say that ha- half the people that look at an average are going to be disappointed, half are going to be happy because they'll be over or under that, um, because that's just the way averages work. And, um, you might buy a property today and it might rocket up in price in the next 10 years. And all of a sudden your yield looks like, it looks like crap. Um, and, and again, you might consider selling that property and redeploying your capital. But there, there are reasons that this is just one thing that you can consider.

• 16:33Speaker 00

  Now, if you want to play around with that calculator, we'll drop a link down in the description and the show notes. So you can give that a go. But what is the number one rental yield area?

• 16:42Speaker 01

  So that's the South Waikato District and that's 7.3%. So again, really, really high compared to places like Christchurch or Auckland.

• 16:50Speaker 00

  What sort of towns are we talking there?

• 16:52Speaker 01

  Places like Toko Rawa and Tiwa, Tiwa.

• 16:55Speaker 00

  Yeah, so small towns that you drive through when you're, when you're leaving Hamilton and going down to Napier. If I could say that.

• 17:03Speaker 01

  Yeah.

• 17:03Speaker 00

  No, you could say that. Yeah, that's true. Without a word of a lie, that's true. You do drive through them. And look, I did promise every area, area ranked by yield. So I'm going to put that on your screen as well, so that you can check your, uh, own town. Because in the past 15 minutes, you've learned every New Zealand city ranked by rental yield from west to best, do older houses get higher rental yields than the newer ones? And how much your house makes compared to 57,000 other rental properties in New Zealand? Right, let's wrap it up there, but please don't forget to rate, review and subscribe to the podcast. Really does help us get the message out to more people.

• 17:39Speaker 00

  Thanks for listening to the Property Academy Podcast. I'm your host, Stephen Knight.

• 17:41Speaker 01

  I'm Mr. Nicole.

• 17:42Speaker 00

  We're going to be back again tomorrow with even more daily strategies, tactics and insights to help you get the most out of the New Zealand property market. Until next time.