Looking for your next (or first) investment opportunity? You could do a lot worse than Auckland. It’s hot property, there’s no question, and I reckon it’s still one of the best places you can purchase a rental – if you can find the right property, that is.

Strong Fundamentals

Auckland is the urban powerhouse of the country, there’s no doubting that. It’s a city of 1.7 million people (and rising!) and while it may not be the capital of NZ, it is the financial capital.

That makes it an incredibly attractive place for people to move to, from both within NZ itself and overseas. Auckland is easily the top destination for new arrivals looking to start a new life here, as well as one of the best places to build your professional chops, if you’re coming from elsewhere within Aotearoa.

That popularity has meant that it’s basically a candyland for investors. There’s nearly always heaps of renters clamouring for a decent place to live – not to mention first home buyers who want to start a family – and while consents for new places are going up (due in small part to the operations of yours truly), supply remains limited.

Auckland is booming, despite COVID-19, and it’s likely to do so for a while. Don’t believe me? Just check recent auction results. Normally the property market cools down in the run-up to an election, but in Auckland, clearance rates are still above 70%!

Low yields in the City of Sales

The City of Sails is closer to the City of Sales, but that doesn’t mean there aren’t things investors need to watch out for.

Where property prices are high, rental yields tend to be low. This is true for Auckland, where recent data has shown that Central Auckland suburbs are lucky to break 4 percent for a 3-bedroom home. That’s what interest.co.nz tells us anyway.

Elsewhere in the country, you’d be looking at 4 to 5 percent or more for a similar property.

This is mostly due to the high prices; rental payments can only match up to property value to a certain degree, which leaves investors at risk of not being able to cover the mortgage payments for the property with the rental payments.

Choosing the right property.

Avoiding that risk is all about picking the right property. Some investors like to go for the big, 5-bedroom places near universities, decking established properties out with individual ensuites and kitchenettes to really appeal to the flatting student demographic.

It’s a good idea, but then you run the risk of having to cycle through many tenants over the years, not to mention the possible resale issues with having such a niche property.

Other investors go for something more fundamental.  Rather than focusing on customising existing properties, these investors purchase homes that are
a) well-located,
b) have a wide appeal,
c) have great bones, and
d) are newly built.

Combine all those factors together and you gain a property with excellent potential tax benefits from depreciation, fantastic appeal to renters and buyers later down the line, and low maintenance costs.

That’s why I’ve invested so much into building affordable homes that tick all those boxes. They’re not just great for first home buyers, they’re great picks for investors too. Low yields in Auckland might be what you expect, but they don’t have to be what you get.