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But first,

What is Rental Yield?

There are two types of rental yield, gross rental yield and net rental yield. 

• Gross rental yield takes into account the rent return on the property before any expenses are deducted.  
• Net rental yield is the difference left after any expenses have been deducted from the rental income, for example repairs and maintenance, council rates or insurance. 

How Do You Calculate Rental Yield?

To calculate your rental yield you first need to determine the annual rent (we’ll say $40,000 for this example) and then the property value (again let’s go with $800,000)

For gross rental yield:

($40,000/$800,000) x 100 = 5%

For net rental yield:

Add up any deductions or expenses, for this example we’ll go with $8000 and take this off the annual rent. 

($40,000 – $8000) / $800,000 x 100 = 4%

What is the National Gross Rental Yield?

As of August 2024 the gross rental yield nationally is 3.9%, which is the highest it has been since early 2016. If we look further back to 2010 it was between 4 -4.5% and was at its lowest in 2021 at 2.8%

How About Across Main Cities?

• Auckland and Wellington: 3-3.5% 

• Hamilton and Tauranga: Closer to 4% 

• Christchurch and Dunedin: A bit over 4%

There are a number of reasons why a city might have a higher rental yield than others: 

• More affordable house prices attract property investors. So, despite lower rents, relatively, the percentage yield is higher. 
• The size of the student population can affect the demand for rental properties. 
• Likewise affordable lifestyles and locations play into the demand for rental properties. 
• Lower council rates can affect how much needs to be deducted from the rental income.
  

If you’re thinking about diversifying or expanding your investment portfolio and want your finances to be the best position then get in touch with The Finance Hub team. We’re here with you every step of the way to financial freedom. Give us a call on 0800 346 482.

Data Source: CoreLogic