Happy returns for Cannons Creek home investors
It's Struggle Street to some, but property investors have struck gold on cheap rental properties in Cannons Creek and Wainuiomata, which offer some of the best returns in the country.
A Westpac report shows returns on rental properties in the two suburbs ranked in the country's top 10 suburbs.
The gross yields, or annual rent as a percentage of a property's cost, were calculated on three-bedroom rental properties and apartments.
Cannons Creek properties were found to return 7.8 per cent a year, while Wainuiomata ones provided 7.1 per cent.
Westpac retail bank general manager Ian Blair said the cheaper cost of three-bedroom rental properties in the Hutt Valley, Cannons Creek and Titahi Bay, combined with secure rents, were delivering high yields to investors.
Investor Mike Duncan bought his "superannuation scheme" - a block of four four-bedroom rental houses and a cottage in Cannons Creek - just before Christmas.
He had owned rental properties in Titahi Bay but was attracted to Cannons Creek because the "price is right".
"They're really cheap and yet the area's bloody nice. I mean there's nothing wrong with it.
"Of course your rents are down a bit on what you'd get elsewhere but not a hell of a lot . . . around $260 to $280 a week for an average house."
The Westpac report found that the estimated valuation of a Cannons Creek rental property was $193,000, attracting median rents of $290 a week.
These figures were the lowest in the region, followed by Wainuiomata at $222,000 and $301 a week.
Mr Duncan, a graphic artist at Fairfax NZ, said the returns on his Titahi Bay properties, which were recently sold, were nothing compared to the returns he was now getting at Cannons Creek.
The properties had been easy to fill - people walked up to him off the street as he was repairing them.
It took two months, with the help of his family, to sort out the former state houses before getting tenants in from the middle of February.
"These ones had been vacant for over a year, the hot water cylinders had been stolen and door knobs and things smashed off, only because they'd been open and no bugger cared about them.
"Now they're all up and rented and paying for themselves."
The Westpac report said property investors were becoming more active in the market, replacing first-home buyers hit by loan-to-value ratio restrictions.
But Mr Duncan was not sure if many were buying in Cannons Creek just yet, and was cautious of encouraging others to do so.
"I'm not recommending it to anyone else to do it, because I want to get a few more yet."
The report also said capital gains - measured as the change between rental property values between December 2010 and the same month last year - were "far less rosy".
That was because the Wellington region was not experiencing a housing shortage, and the local economy was not sufficiently strong to drive capital gain.
Berhampore and Ngaio provided the best capital gains in the region, at 4.9 per cent and 3.6 per cent respectively.
- The Dominion Post
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