The average Auckland rental property is now delivering a gross yield above most mortgage interest rates, presenting an
appealing opportunity for those considering investing in a rental property or expanding their portfolio.
“The gross rental yield for the typical Auckland rental was 3.27% through April and May, when we also saw many special
fixed mortgage rates dip under 3.00% to historic new lows,” says Kiri Barfoot from Barfoot & Thompson
“This means we’re seeing a balancing, even a shift, between the cost of borrowing and the potential gross gain on a
rental property.”
Barfoot & Thompson calculates the gross yield figure by comparing the average annual revenue from 3-bedroom* tenancies to the
average price of 3-bed homes sold by the company over the past six months. So, with the average rental price for a 3-bed
Auckland home at $584 per week, or $30,368 a year, and the average 3-bed sale price over the past six months at
$938,688, the gross yield is 3.27%.
The average gross yield has recently been as high as 3.47% (November 2019), however, recent increases in residential
sale prices have seen the figure edge slightly lower.
“While this number represents just one calculation a potential investment buyer should consider, it is a change worth
taking notice of.”
She said it could also be a strong signal to investors as mortgage interest rates were expected by many to remain low
for some time.
And while the rent freeze was still in place for existing tenancies, Ms Barfoot says the average price for newly rented
properties not subject to the freeze indicated modest growth in many areas of the city.
“For those considering an investment purchase, key right now is finding an individual property with numbers that stack
up, and that is less exposed to current vacancy pressures.”
In reviewing gross rental yield by suburb over recent years, the more southern, western and northern areas of the city
tended to perform best. “At a suburb level, nearly 60 Auckland locations are delivering gross yield above 3.00%, and
twelve above 4.00%, with suburbs south of Auckland city making up the bulk of these.”
Reviewing data kept since March 2015, the average gross yield has been as low as 2.85% in late 2016 - when average
mortgage rates were approximately 5.60% floating or 5.10% fixed for two years, and as high as 3.54% in March 2015 - when
average mortgage rates were approximately 6.60% floating or 6.00% fixed for two years.** Currently, some of the lowest
advertised rates by the major banks are 2.69% fixed for two years.
Gross yield does not take into account operating costs, interest rates, vacancies or capital gain and will vary across
individual properties.
See more about how to calculate return on investment here: https://www.barfoot.co.nz/landlords/help-and-tips/return-on-investment
*Three-bedroom properties make up the most significant portion of Barfoot & Thompson’s portfolio of approximately 17,000 rental properties, and so have been chosen as the standard example for the
‘typical’ Auckland rental.
**Historic interest rate data sourced from https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-mortgage-rates.