New Zealand's hottest market for residential property investors is Southland, new figures from the Real Estate Institute of New Zealand show.
The region has seen a near 20 percent rise in capital gain year on year - from $285,000 to $340,000 - and, more importantly, enjoys a near-5 percent yield for rental properties, making it the strongest location for investors.
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REINZ chief executive Bindi Norwell said the region was ticking all the boxes from a strategic investment perspective.
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“No doubt, the area will continue to remain on investors’ radar going forward, particularly now that some of the major banks are offering investors the same lending terms as owner-occupiers,” she said.
Economist Ed McKnight, who works with property investment advisory firm Opes Partners, said Invercargill was proving attractive for early stage investors looking for low entry point homes.
“They are looking for the medium-priced three-bedroom standalone house, which they can do cosmetic renovations on to increase its value and the yield. Then they head back to Auckland and leave the property with the property manager. That’s the standard play we see in Invercargill,” he said.
REINZ chief executive Bindio Norwell says Southland ticks all the boxes for investors. Photo / Supplied
McKnight believes that Southland is reaching the end of its property boom, and predicts prices will soon start to flatten.
“Over the last 27 years Southland's median house price has been on average 47 percent of New Zealand’s median house price and now it is sitting at 53 per cent, so that tells me that their house process will start slowing down,” he said.
Tall Poppy Invercargill sales agent Claire Campbell told OneRoof that while out-of-town investors were in the market in Southland, local families are and first home buyers were more active.
“With Invercargill still being affordable and people prioritising savings, those that are looking to downsize or move closer to the family in Southland are buying,” Campbell said.
She’s noticed a much higher demand for lifestyle properties in Southland in the past three months.
“People are offering to pay more than the asking price to secure the property. Rather than just land, people are looking for established lifestyle blocks to live in,” she said.
The REINZ report shows that every region bar Auckland, Bay of Plenty and Canterbury had enjoyed double-digit rises in capital gains in the three months to the end of June.
Hawke’s Bay saw the biggest increase, rising 19.7 percent from $470,000 to $562,500. In third place was Gisborne, which was up 16.2 percent, from $370,000 to $430,000.
Yields fell for most parts of the country, which is due to the six-month rental freeze that came into effect at the end of March as a result of Covid-19.
"None of the falls were particularly dramatic suggesting that initial fears that yields would be significantly impacted by rising unemployment as a result of COVID-19 have been unfounded,” Norwell said.
