Auckland gross rental yield now above most mortgage rates

by Roxanne Libatique29 Jun 2020

Auckland rental properties are now delivering a gross yield above most mortgage interest rates, according to the latest data from Barfoot & Thompson.

Barfoot & Thompson calculated the gross yield figure by comparing the average annual revenue from three-bedroom rental properties to the average price of three-bedroom homes sold by the company over the past six months.

The latest data revealed a 3.27% gross rental yield for an average Auckland rental property in April and May, which complements the less than 3.00% special fixed mortgage rates in the same period.

“This means we're seeing a balancing, even a shift, between the cost of borrowing and the potential gross gain on a rental property,” said Kiri Barfoot, the director of Barfoot & Thompson.

Read more: S&P predicts 10% drop in house prices

The average gross yield in November 2019 was 3.47%. However, the recent increases in residential sale prices have caused the figure to drop slightly – a strong signal to investors as mortgage rates were expected to remain low for a while, Barfoot said.

“While this number represents just one calculation a potential investment buyer should consider, it is a change worth taking notice of,” she continued.

Barfoot added that the average price for newly rented properties not subject to the rental freeze reflected modest growth across 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,” Barfoot concluded.

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