Rental yield measures the annual return on a property investment as a percentage of its value. It’s the primary metric NZ investors use to compare properties and assess whether a rental investment makes financial sense.
Gross yield = (annual rent ÷ property value) × 100. Net yield deducts all expenses (rates, insurance, maintenance, management fees, vacancy). In Auckland, gross yields typically run 3–4.5%; in Christchurch and Hamilton 4–5.5%; in smaller cities 5–7%+. A gross yield below the mortgage interest rate means the property is cashflow-negative — you're subsidising it from other income.
Rental Yield Calculator
Rental Yield Calculator
Gross Yield vs Net Yield
Gross yield
$$\text{Gross yield} = \frac{\text{Annual rent}}{\text{Property value}} \times 100$$
Simple and quick to calculate — used for initial property comparisons. Does not account for any costs.
Example: $580/week rent on a $700,000 property Annual rent = $580 × 52 = $30,160 Gross yield = $30,160 ÷ $700,000 × 100 = 4.31%
Net yield
$$\text{Net yield} = \frac{\text{Annual rent} - \text{Annual expenses}}{\text{Property value}} \times 100$$
More meaningful — accounts for vacancy, rates, insurance, maintenance, and management fees. Net yield is what you actually earn.
Typical expenses on a $700,000 rental property:
| Expense | Annual cost (estimate) |
|---|---|
| Council rates | $2,500–$4,000 |
| Building and landlord insurance | $2,000–$3,500 |
| Property management (8.5%) | $2,500–$3,000 |
| Maintenance allowance (1% of value) | $7,000 |
| Letting fees (amortised) | $500–$800 |
| Total | $14,500–$18,300 |
Net yield example: ($30,160 − $16,000) ÷ $700,000 × 100 = 2.02%
Net yields in NZ are typically 1.5–3.5% lower than gross yields.
What Is a Good Rental Yield in NZ?
| Market | Typical gross yield | Typical net yield |
|---|---|---|
| Auckland | 3.0–4.5% | 1.5–2.5% |
| Wellington | 3.5–5.0% | 2.0–3.0% |
| Christchurch | 4.5–5.5% | 2.5–3.5% |
| Hamilton / Tauranga | 4.0–5.5% | 2.5–3.5% |
| Dunedin | 5.0–6.5% | 3.0–4.5% |
| Invercargill / Whanganui | 6.0–8.0%+ | 4.0–6.0%+ |
A gross yield below the mortgage interest rate (currently ~6–7%) means the property is cashflow-negative — you’ll be topping it up from personal income each month. Many Auckland investors have accepted this for capital growth, but it requires financial capacity to sustain.
Yield vs Capital Growth Trade-off
NZ property investors typically face a trade-off:
- High yield markets (smaller cities) = better cashflow, lower capital growth historically
- Low yield markets (Auckland) = poor cashflow, stronger capital growth historically
Neither is inherently better — it depends on your investment goals, holding capacity, and time horizon. A cashflow-positive property in Dunedin may grow more slowly than an Auckland property but doesn’t require top-ups from your salary.
Frequently Asked Questions
What is a good gross yield for NZ rental property?
A gross yield above 5% generally signals reasonable cashflow potential. Below 4% in the current rate environment almost certainly means negative cashflow. Above 7% in small provincial markets often reflects illiquidity and higher maintenance risk rather than genuine outperformance.
How do I calculate rental yield on a purchase I haven’t made yet?
Use the asking price as the property value and research comparable rents in the area (Trade Me Property, Barfoot & Thompson rental listings, or Tenancy Services bond lodgement data). Apply an 8–10% expense ratio to the rent as a first-pass expense estimate.
Should I use purchase price or current market value for yield?
Both are useful. Purchase price yield tells you the return on your original investment. Current market value yield tells you the yield the market is currently pricing. If your property has increased significantly in value but rent hasn’t kept pace, your current yield (on market value) will be lower than your original purchase yield.
Does rental yield include capital gains?
No — yield only measures income return (rent). Total return includes capital growth. In NZ, capital gains on investment property held over 2 years are not taxed under the bright-line test (unless you’re a property trader). This tax-free capital gain is a key reason NZ investors have historically accepted low rental yields.