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Two key factors are Dunedin's relatively cheap housing market and the consistently strong student demand, which deliver some of the best gross yields around the country, Westpac general manager, retail bank, Ian Blair said yesterday.
''As property investors come back into the market, the report underlines the need for them to know what they want to achieve and how they want to do it,'' Mr Blair said.
Gross rental yields are the rent paid, before deductions of tax and depreciation, rates and insurance, maintenance or repairs, are taken into account.
The report identifies the best suburbs for gross yield and capital gains, in seven centres across the country, looking at two-bedroom apartments and three-bedroom houses.
Mr Blair said, for three-bedroom houses, Forbury, in Dunedin, topped the country with an 8.3% gross yield and South Dunedin was second on 8.2%. St Kilda, Calton Hill, Northeast Valley and Brockville also made the top 10 for gross yield, but capital gain in Dunedin was not so strong, where Auckland and Christchurch dominated.
Aside from Brockville featuring well for gross yield at 6.9%, its value as a suburb for rental property investment had Dunedin's best capital gain at 4.3%, 1% ahead of Maori Hill and Northeast Valley.
Between the seven centres - Dunedin, Auckland, Christchurch, Hamilton, Wellington, Tauranga, and Palmerston North - the range of top gross yields for three-bedroom houses was 6.8% to 8.3%. Mr Blair said investing for yield and capital gain required two different strategies. Investors had to understand capital gain could be a shorter-term prospect, while rental yield was more commonly long term.
Auckland dominated capital gain returns, these ranging between 14.4% to almost 19% in the top bracket, while the rest of the country had far lower capital gain; the highest being Wellington on 4.9%, Hamilton 4.8% and Dunedin 4.3% (Brockville).