What’s a Good Rental Yield in Christchurch?

LM b W

Laine Moger

Journalist and Property Educator for 6 Years
Introduction

The question everyone wants answered: What’s a good rental yield in the city I’m investing in?

The frustrating answer is … “it depends".

The problem is it’s not straightforward. 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.

Christchurch has historically attracted lower capital growth compared with other cities. But high yielding suburban properties do their best to make up for it.

The median gross yield across Christchurch suburbs is 3.97%. That compares with 3.12% in Wellington and Hamilton, and 3.36% in Auckland.

As you know, yields aren’t the only factor to consider when sussing out a good investment - but here is a good graph to get you started.

Current Yields

What Yields Are Other Property Investors Getting in Christchurch?

So, let’s dive in, this graph shows you the real yields property investors are accepting in Christchurch.

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 Christchurch are accepting.

Similarly to what we see elsewhere, the trend slopes downwards. Put simply, that means more expensive properties tend to get lower yields.

But if purchasing a more affordable property, you can expect that rental yield to be higher.

Graph

How To Use The Graph

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

Find the area 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.

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 $600,000 and $700,000, then find that on the bottom axis.

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 $650,000 property in Christchurch City, the black trend line suggests a gross yield of about 3.85%.

But not every $650,000 property earns this.

If you are purchasing a property for this price, there are investors achieving yields between 2.48% and 6.47%

Hovering over the red bubbles shows us there is a $675,000 property earning a 6.47% gross yield.

Similarly, there is a property worth $645,000 earning a gross yield of 2.48% – not a very good yield.

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 Christchurch.

Here are some of the other things to keep in mind:

  • Just because an investor advertises a property for a specific rent on Trade Me, it doesn’t mean that is the final rent agreed.
  • 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 $675k property with a 6.47% yield? That is likely to be a high-yield apartment or boarding house. In other words, don’t expect to get a 6.47% yield if you’re buying a standalone house with a ton of land on the outskirts of New Brighton.
  • 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 $1.5 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.

Yield Changes

How Have Yields Changed Over Time?

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

Christchurch yields have been steadily declining, from an average of over 7% in 1993 to less than 4% in 2021.

The graph also shows yields were relatively steady between 2012 and 2019, up until the pandemic, where there was a larger increase in house prices.

This drove up house prices and lowered yields – property owners had less revenue generated by their properties as a percentage of their property’s value i.e. rents had not increased as fast as house prices.

Now the data in this graph is measured a bit differently to others on this page. This shows the median rent compared to 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 6% 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 good yield 5 years ago may be totally unachievable in today’s market.

More 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?

With all this said, while you can get a pretty good yield from a good, affordable property in Christchurch – yield is not the only thing to consider. So, this is by no means a make or break graph.

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 do so.

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.