What’s a Good Rental Yield in Auckland?

LM b W

Laine Moger

Journalist and Property Educator for 6 Years
Introduction

So, many people want to know what a good rental yield is in the city they are investing in.

Ask the question in a Facebook group and you’ll hear the common refrain … “it depends”.

The problem is it’s not a straightforward answer. But as a property investor you still want an answer about what other yields investors are accepting.

That’s what you’re going to learn in this article.

As a general rule the highest gross yields tend to be where property prices are cheap, and populations are low.

Clearly, this description does not fit Auckland, the country’s most highly populated city.

So, in Auckland, prepare yourself for seeing lower yields than the rest of the country. But that doesn’t mean you can’t get a banging investment in the City of Sails.

Current Yields

What Yields Are Other Property Investors Getting in Auckland?

So let’s dive in. This graph shows you the real yields property investors are accepting in Auckland.

Each dot represents a different property that was advertised on Trade Me. We’ve then matched up that property with OneRoof data to see what it’s currently worth.

That’s allowed us to estimate the sort of rental yields property investors in Auckland are accepting.

So, what does the graph tell us and how do we use it? Firstly, more expensive properties get lower yields, so if you are purchasing a higher value property expect to have a lower rental yield.

If purchasing a more affordable property, expect that rental yield to be higher.

Here’s how you use this graph to figure out an acceptable yield range for your investment property:

1) Find the area that your property is in

Use the buttons at the top of the graph to click through to the council area where your property is based.

So, for instance, if purchasing a townhouse in the old Auckland City Council area, hit “Auckland City”.

2) Locate the price of property you expect to buy, using the bottom axis

The X-axis (at the bottom of the graph) shows the price of properties. Use this to locate the price you’re expecting to pay.

For instance if you’re looking at a property between $900,000 and $1.1 million, then find that on the bottom axis.

3) Start hovering over bubbles in your price range, and use the black tend line as a guide

Now that you’ve found your price, start hovering over the bubbles. This will give you an estimate of the sort of yields that real property investors are accepting when tenanting their properties.

The black trend line shows a mid-range of the yield you might accept. And then the bubbles show you the range of what’s possible.

So, for instance, if you were thinking of purchasing a $1 million property in Auckland City, the black trend line suggests a gross yield of about 3.3%.

But not every $1 million property earns a 3.3% gross yield.

Hovering over the blue bubbles shows us there is a $970,000 property earning a 5.9% gross yield – definitely on the high end.

Similarly, there is a property worth $1.1 million earning a gross yield of 2.38% – not a very good yield.

So, if you’re purchasing a property between $900,000 and $1.1 million in Auckland City, expect a yield between 2.38% and 5.9%.

And if you earn more than 3.3%, you’re doing better than average. If you earn under 3.3%, you’re yielding below average.

Graph Limitations

Is This Graph Foolproof?

Before you start saying “this graph doesn’t take into account x, y, z”, you are absolutely right. This method definitely has shortcomings. It’s not bullet-proof.

But it is the best tool available that gives a sense of what rental yields investors are accepting in Auckland.

For completeness, here are some of things to keep in mind:

  • Just because an investor advertises a property for a specific rent on Trade Me, it doesn’t mean that was the final rent.
  • The gross yield calculations are based on OneRoof’s valuation data. That’s not necessarily going to be 100% accurate.
  • We haven’t included what the property types are. For instance the $970k property with a 5.9% yield? That is likely to be a high-yield apartment or boarding house. In other words, don’t expect to get a 5.9% yield if you’re buying a standalone house with a ton of land on the outskirts of Auckland.
  • This gives a snapshot of the market at one point in time. And it only shows the properties available for rent on Trade Me. After a month most of those properties will be tenanted and off the market. So this graph gives a snapshot of the current market, not all properties that are being tenanted across the country.
  • Sometimes only a single room in a property is rented e.g. a single room might be rented for $200 a week in a $2 million house. We’ve removed all instances of this, but there could be the occasional outlier in the data.

While there are no doubt some limitations, we still stand behind this tool as a useful way to get a sense of the sorts of rental yields that real investors are accepting in the current market.

Historic Yields

How Have Yields Changed Over Time?

Alongside current trends, it’s equally interesting to see how rental yields have fared over time.

Auckland yields have been steadily declining, from an average of over 6% in 1993 to less than 3% in 2021.

Now the data in this graph is measured a bit differently to others on this page. This shows the median rent compared with the median house sale price. For the eagle-eyed data nerds out there – yes, this isn’t necessarily the best measure of yield.

But what’s important here is the trend – a slow and steady decline in yields.

The reason for this is that property prices have been increasing in excess of 7% per year, and rents have increased at about 4-5% per year. Since property prices are rising faster than rents, yields have declined.

This is important because investors need to be cautious when reading older blogs, articles and books that mention specific target yields. What was a realistic yield 5 years ago may be totally unachievable in today’s market.

Other Tools

Other Tools At Your Disposal

This graph is a great initial indicator for what yields other investors are accepting in your district of interest.

But once you get down to looking at a single property you are interested in, you’re going to want a more specific answer to your yield queries.

For a more comprehensive look at the Return On Investment (ROI) of the property you’re looking into, use these free tools:

Use this handy spreadsheet to measure the amount of return on investment versus the cost of that investment.

Head to this page for a more comprehensive dive into the different types of yields (e.g. net and gross), how they are calculated and how this information can best inform you as a property investor.

Conclusion

Final Thoughts?

There’s no way around it, Auckland property prices have been skyrocketing for decades. And while rents have increased, they haven’t kept up.

This has pushed rental yields lower. This is why you will need to prepare yourself for a slightly lower yield if purchasing a rental property in Auckland compared with the rest of the country.

You can use these graphs to get an indication of the sort of rental yield your property could attract. But remember, these graphs are initial indicators, not the be-all and end-all.

Once you find a property you really like, and want to dive into more specific detail, check out our other calculators to help you.

Good luck.

LM b W

Laine Moger

Laine Moger has been a journalist and reporter for the last 6 years. She previously worked for Stuff, The North Shore Times and Radio NZ. She has a Bachelor of Communications (Honours) from Massey University and a Diploma of Journalism from the London School of Journalism.