309 Ponsonby RoadThe first round of investments featured in NAI Harcourts’ Key Assets magazine have been auctioned and the results reveal the trends in yields being achieved in Auckland and Hamilton.
In Auckland three investments in Ponsonby Road’s Three Lamps area sold for yields between 4.76% and 5.025%.
309 Ponsonby Road, tenanted by ASB Bank, is returning $201, 000 per annum + GST and outgoings. It sold for $4,000,000 achieving a 5.025% yield.
305 Ponsonby Road is currently tenanted by Bayleys Real Estate Ltd & Encore Designer Seconds Ltd and returns $205, 560 pa + GST and outgoings. It sold for $3,800,000, 5.4% yield.
Finally 307 Ponsonby Road, tenanted by Juli Bridal for $500,000 pa + GST and outgoings, sold for $1,050,000, 4.76% yield.
The properties were marketed by Tim Turner of NAI Harcourts North Shore and auctioned by New Zealand’s top auctioneer Andrew North. Turner says splitting the units up meant they could appeal to buyers under $5m, and as a result there was good bidding on all three. After multiple bids on each, the three titles were sold to the same investor.
Turner says in Auckland 5-7% yields are typical, although this softens the higher the price goes.
By comparison Managing Director of NAI Harcourts Hamilton Commercial Mike Neale says investors should be looking south of Auckland if they want to achieve yields above 7%, even as high as 10%.
Two CBD investments featured in Key Assets illustrate this, selling at 7% and 8.41% yields.
A property at the corner of London and Victoria Streets, with a six year lease to national brand Columbus Coffee returning $53,746 pa + GST and outgoings, sold for $767,800 returning a 7% yield.
Another CBD property at 801 Victoria Street returning $24,675 pa + GST and outgoings, sold for $305,000 returning 8.41%.
Neale says Hamilton sits around 12-18 months behind Auckland in property market trends and the Waikato has not yet reached its heightened prices. Most yields are at around 7.5 – 9% he says.
“At the moment we have some of the best investment stock we have had in the last five years, in terms of the quality of the buildings, tenants and length of leases. If you are looking for an investment and the numbers are just not making sense in Auckland, look at what we have to offer in Hamilton.”
However, there are exceptions, with some properties in Hamilton achieving record high yields. Neale cites 404 Anglesea Street, tenanted by Canon and returning $65,000 pa + GST and outgoings on a new six year lease. Last week it sold for $1,045,000, 6.2% yield.
Neale says the prominent location, excellent international brand tenant and the fact it is within 200m of possibly more office space than anywhere else in Hamilton’s CBD make this an exceptional property and as such it has achieved a higher price and lower yield.
NAI Harcourts General Manager Michael Grainger says there are good opportunities in both Auckland and the Waikato.
Grainger says the results show well-leased properties are very sought after and are driving yields down, even with interest rates rising, particularly in the competitive Auckland market.
“Investors are prepared to pay more in Auckland due to limited supply. The Christchurch situation has also had an impact, with some investors pulling their money out of the city post the earthquake and reinvesting in Auckland where there is deemed to be stability – another factor affecting yields.”
Grainger says NAI Harcourts’ global reach, combined with the Harcourts’ residential network, gives a competitive advantage for vendors wanting to reach a large market.