The housing market never stands still, especially in the three years post-COVID. Indeed, the current downturn has already been in progress for almost 18 months, so it seems a good time to take stock of how prices, rents, and yields have changed.
From their respective peaks, we’ve measured falls in average property values of 19.7% in Wellington, 12.2% in Auckland, and 11.4% in Dunedin. Tauranga is at a 9.7% decline so far, Hamilton 9.0%, and Christchurch less dramatic at a 4.7% fall from peak. Other areas such as Invercargill, New Plymouth, and Queenstown have also all seen less than 5% falls.
In the meantime, rents have tended to keep rising over the past 12-18 months, although more recently, the rate of increase has definitely slowed down. As measured from the MBIE database of bonds lodged, rents in the three months to January were 3.3% higher than a year earlier – still, a decent rise, although below the typical pace of 4-5% and well down on the rates of more than 7% that were seen over the first half of 2022.
Inevitably with rents rising and prices falling, rental yields have risen – that’s broadly good for investors, although much more beneficial for new buyers as opposed to existing landlords (who have seen capital losses on paper). Nationally, from record lows of 2.6% over late 2021 and into 2022, the average gross rental yield has now lifted to 2.9% and looks set to climb towards 3.5% in the coming months as prices fall further, and rents rise a bit more or (probably) at worst flatten off.
Of course, even at 3.5%, rental yields are well below the mortgage rates likely to prevail over the next 12-18 months, typically perhaps 6.5-7% for the foreseeable future. This means...
