Top returns on rental homes in city suburbs

Tauranga Rentals owner Dan Lusby said properties in Hairini were returning good yields for landlords as the suburb was close to all the main routes and facilities. Photo / George Novak

Landlords with properties in Hairini, Welcome Bay and Greerton are reaping the Western Bay's highest returns, while properties in Mount Maunganui and Tauranga have had the best capital gains.

Local real estate agents say the rising returns are being driven by a shortage of rental properties.

The latest Westpac Property Investor Report says the gross yield for rental properties in Hairini was 6.9 per cent, Welcome Bay 5.5 per cent and Greerton 5.5 per cent.

Properties in Mount Maunganui posted capital gains of 3.6 per cent. In Tauranga, the figure was 3.3 per cent.

Nationally, Mount Maunganui rated ninth in New Zealand for capital gain, ahead of Ashhurst near Palmerston North at 2.5 per cent, with Mangere Bridge recording the highest rate at 17.5 per cent.

Hairini was the seventh-ranked suburb in the country for gross yield.

Auckland enjoyed the highest capital gain, delivering 14.5-17.5 per cent for three-bedroom houses.

But Tauranga Property Investors Association secretary Lindsay Richards said this region was poised for "very serious capital gain" because Aucklanders were now investing in the area.

Yield was important from the standpoint of the property paying for itself, but the real value and money was made in capital gain, he said.

"You can make hundreds of thousands of dollars over time down the line, not just a $30 a week type of thing."

Mr Richards said he bought a rental property after the credit crunch in 2007 and sold it two years later after it cost him $9000 annually for upkeep.

"We could see it was costing too much to hold on to, hoping the prices would go up."

Tauranga Rentals owner Dan Lusby said rents had increased by 10 per cent over the past year.

They had 600 properties listed on Trade Me for rent during winter in 2013. Now there were 215, he said.

"That shows there has been a big drop in supply, and the reports we have been getting are there is a lot of employment going on and businesses creating new jobs that are bringing the people here." Hairini, Welcome Bay and Greerton were hot spots because they were close to the main routes and had good facilities, he said.

Ross Stanway, chief executive of Realty Services, which operates Bayleys and Eves, said there had never been a better time to buy.

There was "significant demand by tenants for rental properties," he said. More landlords were also in for the long haul.

"I think we have got a lot of landlords where capital gain may not necessarily be at the front of their mind. It may be more in the terms of rate of return and, if the gain occurs, that is well and good."

It was a balance between capital gain and yield that the landlord could live with and whether they were borrowing heavily to purchase the property.

Harcourts Advantage Realty Tauranga director Simon Martin said it was fielding increased inquiries from potential investors.

"It is really starting to pick up.

"We are really struggling to get hold of rentals at the moment, and anyone looking at buying a property to rent out is not going to have a problem."