NZ's top places for property gains
Auckland is the undisputed winner when it comes to capital gains but Dunedin is proving one of the most profitable places for property investors long-term, a new report says.
The report by Westpac identifies the best suburbs for gross yields and capital gains in seven New Zealand centres.
Auckland's red hot property market made it the best place for investors to make a gain on their capital, with the value of three-bedroom homes jumping between 14 per cent and nearly 19 per cent last year.
However, Dunedin proved to be the pick for long-term landlords, producing seven of the top 10 suburbs for gross yields.
Dunedin's Forbury was the best performer with a yield of 8.3 per cent..
Westpac's general manager of retail banking, Ian Blair, said Dunedin was a great rental investment spot because its properties were cheap in relation to their rental income.
It was also boosted by its large student population.
"There's huge demand for accommodation and I'm sure that's what drives up the yields."
The benefits of Christchurch's rebuild programme were also evident, making it a good place for both capital gains and yields.
Three-bedroom homes in Hornby and Hei Hei were returning gains of 14 per cent and 13.5 per cent respectively, and Addington was the eighth best rental market for apartments, up 6.5 per cent.
Blair said Christchurch's shortage of properties was driving the capital gain while its rental market reflected strong demand from both locals and those there for the rebuild.
"That's what's driving up the yield on rental properties. That yield growth even over the last couple of years has been quite spectacular."
Blair said Westpac had previously done reports on capital gains but this was the first time the report had included rental performances.
With investors increasingly stepping into the vacuum left by first-home buyers following the clampdown on low-deposit loans, he hoped the report would be a guide for investors.
However, they needed to be clear what they were after.
"Investing for gross yield and capital gain require two different strategies and it is vital investors understand that from the outset," he said.
"Capital gain can be a shorter-term prospect, while yield is more commonly a long term play.'"
Westpac's report focussed on Auckland, Christchurch, Hamilton, Wellington, Dunedin, Tauranga and Palmerston North, looking at two-bedroom apartments and three-bedroom homes.
In the rental market, the top 10 suburbs for three-bedroom rentals were producing gross yields of between 6.8 per cent and 8.3 per cent, and apartments yields ranged from 6.4 per cent to 7.5 per cent.
Five of the 10 top apartment suburbs were in Auckland, with Hamilton's Melville at the top.
Capital gains-wise, Auckland was the clear winner in both the bigger houses and apartments categories.
Glen Innes had the highest capital gain on three-bedroom houses with an annualised 18.9 per cent, and Mount Wellington had the best gain on apartments at 16.2 per cent.
Outside Auckland and Christchurch, the rest of the country was reaping much lower gains.
Hamilton's best suburb for capital gains on three-bedroom homes was Claudelands (4.8 per cent), Dunedin's was Brockville (4.3 per cent) and Wellington's was Berhampore (4.9 per cent).
Blair said the report showed the New Zealand property market was diverse.
"That's good because it provides the property investor with different options, whether they're looking for something that's ... maybe a little more short-term, or whether they're looking for a long-term yield play that drives cashflow for them."
He said the property report could be offered on a six-monthly basis.
The report's analysis of capital gains was based on rental properties only and accounted for changes over the last three years.
Gross yields were found by dividing a property's annual rent by the estimated value of all rental stock in that suburb.
Top 10 suburbs for three-bedroom houses by gross yield
Forbury (Dunedin) 8.3%
South Dunedin 8.2%
Cannons Creek (Wgt) 7.8%
Corstorphine (Dunedin) 7.8%
St Kilda (Dunedin) 7.4%
Carlton Hill (Dunedin) 7.4%
Wainuiomata (Wgtn) 7.1%
North East Valley (Dun) 7.0%
Brockville (Dunedin) 6.9%
Parkvale (Tauranga) 6.8%
Top suburbs for three-bedroom houses by capital gain
Glen Innes (Akld) 18.9%
New Windsor (Akld) 17.2%
Hornby (ChCh) 14.0%
Hei Hei (ChCh) 13.5%
Berhampore (Wgtn) 4.9%
Claudelands (Hamilton) 4.8%
Brockville (Dunedin) 4.3%
Ngaio (Wgtn) 3.6%
Brookfield (Tauranga) 3.3%
Kelvin Grove (Palmerston Nth) 2.7%
Top suburbs for two-bedroom apartments by capital gain*
Mt Wellington (Akld) 16.2%
New Lynn (Akld) 15.4%
New Brighton (ChCh) 10.5%
St Albans (ChCh) 10.4%
St Andrews (Hamilton) 4.5%
Upper Hutt (Wgtn) 2.8%
Roslyn (Palmerston Nth) 2.3%
St Kilda (Dunedin) 1.4%
Mt Maunganui 1.2%
Mt Victoria (Wgtn) 0.9%
*Auckland dominates the Top 10 so the top two suburbs were chosen and the best of the other centres added to highlight the contrast with the rest of the country