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Corelogic Palmerston North

Kelvin Davidson, Senior Property Economist, Corelogic

By: KELVIN DAVIDSON

31 January 2020

The Data

Rental data is sourced from the Ministry of Building, Innovation and Employment (formerly the Department of Building and Housing) based on rental bonds lodged. This rental data is supplied to us, grouped into geographic areas based on statistical area units used by Statistics NZ for the census, and as a result do not always match well with common usage suburb names.

The rental data for each area is matched to house price information from our database to determine property prices and therefore yield. The yield is calculated as the annualised rental income divided by the median house value calculated using our E-valuer.

Market Composition

Palmerston North’s rental property market is dominated by houses, with a handful of flats and only five apartments (all in Palmerston North Central). Of the 463 properties recently on the market, 413 have been houses (89%), with a further 45 flats (10%), and only 1% being apartments. Apart from in central parts of

Auckland and Wellington (key apartment markets), it’s very typical for houses to dominate the rental sector in most parts of the country.

The most rental houses are to be found in Takaro/Cloverlea/Milson (62), Awapuni South/Westend (61), and Hokowhitu West and Lagoon (55). By contrast, Massey/Linton/Ashhurst only has 14 rental houses. In five of Palmerston North’s sub-markets, houses comprise 100% of the stock of rental properties, with the lowest concentration (80%) in Palmerston North Central (the only market with apartments).

The most flats are in Takaro/Cloverlea/ Milson (11), and Kelvin Grove/Roslyn and Awapuni South/Westend, with 10 apiece.

House Size, By Bedroom Count

Now looking at those 413 rental houses in Palmerston North, there is a decent spread across the size range, albeit none have only one bedroom. About 45% of the rental houses have three bedrooms, the two- and four-bedroom brackets have 20- 25% each, and 12% have five bedrooms.

The largest market for three-bedroom rental houses is Takaro/Cloverlea/Milson (28), closely followed by Kelvin Grove/ Roslyn (27), and Terrace End/Hokowhitu East (25). The highest concentration of three-bedroom houses is in Highbury/Westbrook, where 100% of the stock is in this bracket. Awapuni North and West is another area with a strong concentration of three-bedroom houses (61%). By contrast, only 26% of Palmerston North Central’s rental house stock has three bedrooms.

The most two-bedroom rental houses are in Hospital/Papaeoia (16), which is also the highest share of any sub-market (33%). At the larger end of the spectrum, key markets for four-bedroom rental houses include Takaro/Cloverlea/Milson, Hokowhitu West and Lagoon, and Awapuni South/Westend. Along with Palmerston North Central, those are also important markets for five-bedroom rental houses.

Rent And Yield

By matching average value to rent we can look at gross yield for three-bedroom houses in each area. Median weekly rents across Palmerston North for three-bedroom houses are all in a fairly tight range, from $385 in Highbury/Westbrook up to
$475 in Hokowhitu West and Lagoon. Highbury/Westbrook also has the lowest median value for three-bedroom houses, at $378,400, with Highbury/Westbrook again the highest, at $602,550.

However, Highbury/Westbrook actually produces the highest gross yields for three-bedroom rental houses in Palmerston North, at 5.3%. Kelvin Grove/Roslyn and Awapuni North and West are also in the five per cent range for yields. Hokowhitu West and Lagoon is lower, at 4.1%.

In terms of the growth in rents over the past year for three-bedroom houses, the figures show strength pretty much right across Palmerston North. Massey/Linton/ Ashhurst has been particularly buoyant (28% rise), but Kelvin Grove/Roslyn and Hokowhitu West and Lagoon haven’t been far behind.

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