House prices continue to rise amid the housing crisis in New Zealand – and investing in residential properties is far from futile, with the Manawatu/Wanganui region boasting a 25.3% increase in capital gains for the three months ending December 2020 compared to the same time the previous year, according to the Real Estate Institute of New Zealand (REINZ).
REINZ’s report stated that yields in the Manawatu/Wanganui region were 4.0%, making it the standout region for residential property investors in New Zealand.
West Coast, which topped the list in the previous quarter, took second place this time. It saw the highest yield in the country at 5.8% – the only region to exceed the 5% mark and the sixth highest capital gains in the country (up 20.2% from $209,000 to $251,200).
Taranaki placed third on the list, with the highest rental yield at 4.1% and the fifth-highest capital gains for the country (up 21.0% from $405,000 to $490,000).
The regions with the most significant increase in capital gains for the three months ending December 2020 compared to the three months ending December 2019 were:
- Gisborne with a 36.6% increase from $410,000 to $560,000;
- Manawatu/Wanganui with a 25.3% increase from $400,000 to $501,000;
- Marlborough with a 23.6% increase from $466,000 to $576,000;
- Hawke’s Bay with a 21.7% increase from $530,000 to $645,000; and
- Taranaki with a 21.0% increase from $405,000 to $490,000.
By contrast, REINZ revealed that Nelson had the lowest capital gains (up 10.8% from $600,000 to $665,000) and the third to lowest annual yield of all regions (3.4%), making it the worst-performing region for residential property investors.
REINZ acting chief executive Wendy Alexander commented: “As house prices have continued to rise, we’ve seen yields continue to fall, showing that some of the strong yields we’ve seen previously are no longer available to investors.
“Again, the regions with the best returns for investors continue to be some of the smaller and more ‘affordable’ regions, which again points to the importance of due diligence before buying an investment property.
“Although there is the obvious convenience of a rental property in your region, sometimes there are advantages to looking ‘outside the box’ and considering where your best investment opportunities lie and factoring in the cost of using a property manager to offset the physical distance.”