Southland Continues Run As Highest Performing Region For Residential Investors, Says REINZ

The Southland region continues to remain the strongest performing region for residential property investors with the second highest capital gains in the country and second highest yield, according to the latest edition of the Capital Gains and Rental Yields Report from the Real Estate Institute of New Zealand (REINZ).

Capital gains in Southland increased by 22.0% for the three months ending March when compared to the same time last year with median prices going from $287,000 to $350,150. Additionally, yields increased 4.8% year-on-year making it the standout region for residential property investors in New Zealand.

Close behind in terms of strong returns for investors was the West Coast region with the third highest capital gains in the country (up 17.4%) but the highest yield for New Zealand at 6.1%.

Similarly, the Manawatu-Wanganui region performed very well in terms of capital gains, up 23.9% year-on-year, the highest in the country, and had good annual yields at 4.3% annually making it another region where investors will have seen good returns over the past 12 months.

Bindi Norwell, Chief Executive at REINZ says: “All regions across the country saw a good lift in capital gains for investors a result of strong median prices increases; with all but three regions (Auckland, Canterbury and Nelson) seeing double-digit increases.

“Again, Southland has proved to be the ‘standout’ region in terms of providing investors with good returns – a trend we’ve seen for a number of months now, mostly the result of low property prices and good rental returns across the region. Additionally, the West Coast has proved to be positive place for investors over the first quarter of the year with the highest yield in the country,” she continues.

“Looking forward, it will be interesting to see what level of impact COVID-19 has for residential property investors, particularly when you take into account the rental freeze and some tenants’ inability to pay their rent due to job losses,” continues Norwell.

At the other end of the scale, the Capital Gains and Rental Yields Report found that Auckland had the third to lowest capital gains across the country (up 7.5% year-on-year) and the lowest annual yield of all regions (3.2%), making it the worst performing region for residential property investors.

“Auckland’s property prices peaked at $945,000 in March so it’s not entirely surprising that Auckland fell toward the bottom of the table in terms of both capital gains and yield. Even though we’re in a post-COVID environment, there is still a shortage of listings which continues to put pressure on investors from a pricing perspective, particularly when they are often competing with first home buyers for purchases.

“Looking forward, the following few months are likely to be an interesting time for investors. On one hand we’ve got some of the lowest lending rates we’ve ever had, the LVRs have technically been temporarily removed and lending to investors is up 25.7% year-on-year. But on the flip side, the country is facing significant levels of rising unemployment and investors are waiting with bated breath to find out whether the 90-day notice will be removed as part of the Residential Tenancies Act changes,” concludes Norwell.

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