After many years in the wilderness, yields on rental properties are picking up – which should appeal to those trying to adapt to the changing property investment landscape.Property value growth around New Zealand has slowed significantly in recent months and that prompted CoreLogic to analyse what it means for returns on investment properties. CoreLogic senior property economist Kelvin Davidson says that after a long period where average property values rose more quickly than rents, which meant gross rental yields fell, the situation has been reversing a little in recent months. “Since the start of 2018, rents have been outpacing property values, and in the year to February 2019, the rise in national rents (5.6%) wasn’t far off double the increase in values (3.0%).”He says it needs to be noted that this hasn’t been due to a pick-up in rents, as that is often linked to tenant income, but rather the slowdown in property value growth.“Either way, gross rental yields have begun to tick upwards again and, although they’re still low (3.3%), that will start to look more appealing to potential new investors in residential property.” In real terms, CoreLogic’s analysis shows that the highest rental yields can now be found outside the main centres.
Property value growth looks set to remain subdued in the coming months.Davidson says rents should maintain their normal consistent pace of growth and that means it wouldn’t be a surprise to see gross rental yields continue to rise in the coming months.“Given the extra regulations and costs currently being imposed on landlords by the government, a rise in gross yields would clearly be a welcome trend for many investors.”Meanwhile, the tax ring-fence on rental property losses kicked in on Monday and that will also knock returns for some investors, although it’s not anticipated it will have a major market-wide impact, he adds.

Source: Landlords.co.nz