Property Market
4 min read
The cheapest rates for property investors are in:
As an investor, what matters is not just how much the council charges you each year. What matters is how much of your rental income gets eaten up by rates.
That’s why we’re not just asking: “Where are rates cheapest?”
We’re asking: “Where do rates take the smallest bite out of rental income?”
In this article, you’ll learn where rates are most affordable for property investors. We’ve compared annual council rates with the average weekly rent in each district.
| Council | Average rates | Median rent | Weeks to pay rates |
| Ōtorohanga District | $2,554 | $560 | 4.6 weeks |
| Grey District | $2,703 | $513 | 5.3 weeks |
| Ōpōtiki District | $3,163 | $600 | 5.3 weeks |
| Kaipara District | $3,181 | $590 | 5.4 weeks |
| Upper Hutt City | $3,393 | $625 | 5.4 weeks |
When we say rates are “cheap” or “expensive” for investors, we’re not just talking about the number at the bottom of the rates bill.
We’re talking about that number compared with how much rent the property earns.
Let’s say you have two properties in different towns.
Both have annual rates of $2,500.
The rates bill is exactly the same in dollar terms.
But it takes 10 weeks of rent for Property 1 to pay the rates.
For Property 2, it only takes 5 weeks of rent.
So the rates are twice as expensive for Property 1, relative to rent.
That’s the key point.
For investors, “cheap rates” doesn’t always mean the lowest rates bill.
It means the lowest rates burden.
Let’s show this with some real examples.
Napier City Council’s rates bill is $665 higher than Invercargill City Council’s.
But Napier properties rent for more, so it takes fewer weeks of rent to pay the annual rates bill.
| Council | Rates | Rent | Weeks to pay rates |
| Napier City | $3,559 | $650 | 5.5 weeks |
| Invercargill City | $2,894 | $473 | 6.1 weeks |
So even though Napier’s rates are higher in dollar terms, they are cheaper relative to rent.
That’s because Napier’s higher rent helps offset the higher rates bill.
Queenstown-Lakes District Council charges the average ratepayer $1,852 more than Southland District Council.
But Queenstown-Lakes properties also rent for much more.
Because of that, the rates burden is almost identical.
| Council | Rates | Rent | Weeks to pay rates |
| Queenstown-Lakes District | $4,848 | $780 | 6.2 weeks |
| Southland District | $2,996 | $480 | 6.2 weeks |
This shows why investors shouldn’t look at rates in isolation.
A high rates bill does not automatically mean that an area is a bad place to invest. In the same way, a low rates bill doesn't automatically make it a good one.
Secure a comfortable retirement with 3 easy steps
Book your free sessionAccording to Stats NZ population figures, the 3 most expensive districts on this measure all have smaller populations.
They are: Ruapehu District (13,450), Carterton District (10,300), and Kaikōura District (4,340).
| Council | Rates | Rent | Weeks to pay rates |
| Ruapehu District | $4,002 | $410 | 9.8 weeks |
| Carterton District | $4,771 | $500 | 9.5 weeks |
| Kaikōura District | $4,019 | $425 | 9.5 weeks |
When you analyse the data across the country, you start to see significant differences.
Here’s the full map where you can explore the most and least expensive rates in the country:
Some investors will say: “Hold on, small towns have higher gross yields. Doesn’t that make them better investments?”
Sometimes, yes. Small towns often do have higher gross yields.
But higher rates and other costs can eat into that return.
Every council needs a mayor, a chief executive, councillors and staff.
That’s true whether the district has a population of 5,520, like Mackenzie District, or 1,816,000, like Auckland.
But those fixed council costs are spread across fewer ratepayers.
That can push the rates burden higher.
Kaikōura District, one of the most expensive areas in the country by this measure, has a population of just 4,340.
So while some smaller towns may look attractive based on gross yield, investors need to check the actual return (after costs).
More from Opes Partners:
After reading this article, you may be thinking: “So where should I invest? Is it in Ōtorohanga District, since that’s ranked #1?”
Not necessarily.
Rates are one of the 7 essential costs you’ll pay as an investor. Each of these costs will differ based on the property.
That’s why, if you're evaluating a property, you need to run a cashflow with all costs included.
This allows you to see the bottom line … and know how much a property will earn or cost you per week.
Some investors will argue in favour of investing in smaller districts. This is because they have higher gross yields, but they also have higher costs in some cases.
When running the numbers on an investment property, don’t make the gross yield the first thing you look at.
Instead, figure out how much money is left once all the costs are paid (cashflow).
After all, gross yields are vanity; cashflow is sanity.
Resident Economist, with a GradDipEcon and over five years at Opes Partners, is a trusted contributor to NZ Property Investor, Informed Investor, Stuff, Business Desk, and OneRoof.
Ed, our Resident Economist, is equipped with a GradDipEcon, a GradCertStratMgmt, BMus, and over five years of experience as Opes Partners' economist. His expertise in economics has led him to contribute articles to reputable publications like NZ Property Investor, Informed Investor, OneRoof, Stuff, and Business Desk. You might have also seen him share his insights on television programs such as The Project and Breakfast.
This article is for your general information. It’s not financial advice. See here for details about our Financial Advice Provider Disclosure. So Opes isn’t telling you what to do with your own money.
We’ve made every effort to make sure the information is accurate. But we occasionally get the odd fact wrong. Make sure you do your own research or talk to a financial adviser before making any investment decisions.
You might like to use us or another financial adviser
