The West Coast has taken out the top spot as the highest performing region for residential investors with the highest yield and second highest capital gains, according to the latest edition of the Capital Gains and Rental Yields Report for Q3 from the Real Estate Institute of New Zealand (REINZ).
Yields in the West Coast increased 6.3% year-on-year; the only region in the country to see a yield over the 5% mark. Additionally, capital gains in the West Coast increased 27.0% for the three months ending September 2020 when compared to the same time last year with median prices going from $196,000 to $249,000 making it the standout region for residential property investors in New Zealand.
In second place in terms of providing strong returns for investors was Taranaki – the first time the region has made the top 3 list in 4 quarters. Taranaki saw the third highest capital gains in the country (up 18.8% from $383,000 to $455,000) and the fourth highest yield at 4.3%.
Followed closely behind was Gisborne, with the highest capital gains for the country (up 27.6% from $384,000 to $490,000) and the seventh highest yield at 4.0%.
At the other end of the scale, the Capital Gains and Rental Yields Report found that Tasman had the second to lowest capital gains (up 9.6% from $615,000 to $674,000) and the second to lowest annual yield of all regions (3.5%), making it the worst performing region for residential property investors.
Bindi Norwell, Chief Executive at REINZ says: “Once again, some of the smaller regions in the country continue to provide the best returns for investors highlighting the importance of doing your due diligence before purchasing an investment property. Many investors want to purchase investment properties in their home town to make it easier to manage and undertake maintenance, for example, but sometimes the best returns can be found a little further afield.”
Regional breakdown of capital gains
The regions with the biggest increase in capital gains for the 3 months ending September 2020 compared to the 3 months ending September 2019 were:
- Gisborne with a 27.6% increase from $384,000 to $490,000
- West Coast with a 27.0% increase from $196,000 to $249,000
- Taranaki with an 18.8% increase from $383,000 to $455,000
- Hawke’s Bay with an 18.2% increase from $489,000 to $578,000
- Manawatu/Wanganui with a 17.1% increase from $385,000 to $451,000.
The lowest capital gains in the country were in Tasman and Nelson with gains of 9.6% and 9.4% respectively.
“With the removal of the LVRs, some of the lowest rates of interest we’ve seen in years and the fact that people have been unable to travel abroad has meant we’ve seen some significant increases in capital gains over the past few months as investors, first time buyers and families all look to take advantage of the current market conditions,” says Norwell.
“Any investors that have sold their investment property in the last few months will no doubt have been pleased with the result – especially as all but two regions (Tasman and Nelson) have seen double-digit increases in capital gains,” points out Norwell.
The regions returning the biggest yields to investors for the 3 months ending September 2020 compared to the 3 months ending September 2019 were:
- West Coast with a yield of 6.3%, down from 7.2%
- Southland with a yield of 4.8%, the same yield as in Q3 2019
- Marlborough with a yield of 4.4%, down from 4.7%
- Taranaki with a yield of 4.3%, down from 4.8%
- Manawatu/Wanganui with a yield of 4.2%, down from 4.6%.
“Q3 was a difficult quarter for some investors who were relying on strong yields from their investment portfolio, with not a single region experiencing an uplift in yield when compared to the same time last year. This is a great example of why experienced investors will have a mix of properties in their investment portfolio to cover off all eventualities,” points out Norwell.
“However, as the COVID-19 emergency rental increase freeze came to an end mid-way through Q3, it will be interesting to see whether our Q4 report will show an uplift in yields – particularly as investors have been so active in the market over the last couple of months,” concludes Norwell.
READ THE FULL REPORT HERE: Capital Gains and Rental Yield Report_Q3_2020_FINAL