Cloverlea has best property yields

Last updated 12:00 27/03/2014

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People investing in Palmerston North property who are after high yields should spend up large in Cloverlea, according to a report looking at the country's rental stock.

But buying in the city does not look like the best move for investors - at least on the surface - as properties there have some of the lowest capital gains and rental yields in the country.

The Westpac Property Investor Report, which looks into the best suburbs for yields and capital gains across seven New Zealand cities for three-bedroom houses, shows the top areas to buy investment property in Palmerston North.

Cloverlea gave the best gross yield, at 6.5 per cent, while Kelvin Grove's 2.7 per cent capital gain was the highest.

But Palmerston North's top suburbs were unable to keep up with the best performers nationwide.

Forbury in Dunedin had the best gross yield at 8.3 per cent, while Glenn Innes's 18.9 per cent capital gains was the best in the country.

No Palmerston North suburb made the top 10 suburbs in the country for either capital gains or yield.

Furthermore, Kelvin Grove's capital gain was the lowest high out of the seven cities surveyed.

Property Brokers agent Francie Schwass, who also owns investment properties in Palmerston North, said people did not buy in the city for quick capital gains.

"Unless there is a big influx of people, you are not going to get great capital gains."

Instead, investors would commonly put money into buying a rental before getting in tenants.

Those tenants would then pay rent which would both pay off the mortgage and interest payments, she said.

"You are investing for yield, which is a lot better."

There were people who bought property in Auckland but could not get rent high enough to pay for the mortgage and interest, she said.

Palmerston North was the second-most affordable area for buying property.

"You put some equity into it and pay the balance by people using their capital for you."

Westpac retail bank general manager Ian Blair said people could either play a short or long game when investing in property.

"Capital gain can be a shorter term prospect while yield is more commonly a long term play," he said.

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- Manawatu Standard


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