Are investors choosing different cities? Some Auckland investment homes yield around 3% to 4%, while Dunedin student properties can reach 8%

A wait-and-see mood still hangs over New Zealand’s housing market, but investment activity observed by industry professionals suggests some money has stayed in residential property and is looking for a new direction.

Auckland has long been one of the markets most familiar to investors. Even when rent did not cover all expenses, topping up the shortfall each week seemed acceptable as long as they believed house prices would keep rising. Now, as capital growth slows, that investment logic is changing.

OneRoof quoted Dunedin real estate agent Matt Morton as saying that some Auckland investment homes offer gross rental yields of around 3% to 4%, while some Dunedin student properties can achieve 6% to 8%. These figures do not represent the overall housing market in either city, but they reflect a widening yield gap between different markets.

Some investors from Auckland and elsewhere are turning their attention to Dunedin student housing, where purchase prices are more attractive relative to rents. Investment money is not heading south across the board, but investors’ criteria for choosing cities and properties are shifting towards places offering clearer cash returns.

A subdued national market, with cities diverging

Cotality data shows that 6935 properties changed hands nationwide in July this year, including agency and private sales, down 6.4% year on year. In the 12 months to July, total national sales reached 89,385, below the 91,411 recorded during the brief recovery in December last year.

National property values fell 0.3% month on month in July. Cotality chief property economist Kelvin Davidson said there were still plenty of properties for sale and buyers were in no hurry to act. However, with unemployment relatively limited, many owners were also under no pressure to cut prices sharply. Buyers are willing to wait and sellers are reluctant to concede, leaving the market in a prolonged tug of war.

However, clear differences have emerged between cities.

Trade Me Property data shows that, in the three months to the end of July, the median time for residential listings to leave the platform nationwide was 70 days, compared with just 42 days in Christchurch. Invercargill recorded 50 days, Selwyn 54 days, and Waimakariri and Palmerston North both 56 days.

By comparison, the Auckland region recorded 72 days, up 3 days on a year earlier, with no Auckland district making the national top ten. Auckland City was relatively quick at 65 days, while Franklin recorded 84 days and Rodney reached 89 days.

This measure tracks the time taken for listings to be removed from the platform, including both sold properties and withdrawn listings. It therefore does not directly equate to the time taken to sell, but can still provide a guide to how quickly properties move through different regional markets.

Auckland rents hover around NZ$650

Auckland remains the country’s largest residential rental market, but rental growth has slowed markedly.

Tenancy Services bond data shows that Auckland recorded 13,872 new residential bond lodgements in the second quarter of this year, up 5.3% year on year and the highest second-quarter figure in at least five years. However, the median weekly rent remained NZ$650, unchanged from the same period last year, and has hovered around this level for nearly three years.

The national picture is very similar. New residential bond lodgements reached 40,980 in the second quarter, up 11.7% year on year, but the median weekly rent remained NZ$600, exactly the same as in the corresponding periods of 2024 and 2025.

An increase in new bond lodgements does not mean the total number of rental homes has risen by 11.7%. A change of tenants in the same property also generates a new bond lodgement. More precisely, tenancy turnover remains active, but ample supply leaves landlords little room to raise rents.

Against this backdrop, gross yields of around 3% to 4% on some Auckland investment homes have limited appeal for investors seeking immediate cash returns. Morton believes that buying an Auckland property whose rent does not cover its expenses requires ongoing top-ups, making this approach easier to justify only when investors are confident about long-term capital growth.

The situation is more pronounced in Wellington. In the second quarter of this year, new bond lodgements rose 7.1% year on year, but the median weekly rent fell to NZ$580, down NZ$15, or 2.5%, from a year earlier. It was also among the lower levels recorded since 2022.

Dunedin attracts yield-focused investors

Compared with Auckland and Wellington, some Dunedin student homes are attracting investors from outside the city who place greater emphasis on actual returns.

Morton said around 85% of the student housing buyers he deals with come from outside Dunedin, compared with about 40% a few years ago. A 5.1% increase in University of Otago enrolments has also provided relatively stable rental demand in some student neighbourhoods.

Some Dunedin student homes can achieve gross rental yields of 6% to 8%, well above the roughly 3% to 4% Morton cited for some Auckland investment homes. However, this does not mean Dunedin rents overall are rising rapidly.

In the second quarter of this year, Dunedin recorded 693 new bond lodgements, down 2.9% year on year. The median weekly rent was NZ$530, up just NZ$10, or 1.9%, from a year earlier.

Some Dunedin student properties are attracting attention primarily because of a more favourable relationship between purchase prices and rental income, rather than sharp rent increases. Homes close to campus, with a suitable number of rooms and clear rental demand, may offer higher yields, while ordinary suburban properties may not share those advantages.

Moreover, 6% to 8% represents gross rental yield, not the final net return. Council rates, insurance, maintenance, property management, vacancy periods and financing costs all need to be deducted. Student housing may also involve frequent tenant turnover and higher maintenance requirements. Higher returns on paper therefore do not mean lower investment risk.

Christchurch offers another option

While Dunedin’s advantage lies mainly in the rental yields of some student homes, Christchurch presents a different set of market characteristics.

The median time for Christchurch listings to leave Trade Me was 42 days, 28 days faster than the national median, with neighbouring Selwyn and Waimakariri also among the national leaders. Trade Me Property customer director Gavin Lloyd believes relatively reasonable prices and strong local confidence have jointly supported Christchurch’s performance.

However, rental growth in Christchurch is also limited. In the second quarter of this year, the city recorded 3582 new bond lodgements, up 2.4% year on year. The median weekly rent was NZ$550, just NZ$1 higher than a year earlier and unchanged from the same period in 2024.

Christchurch’s defining feature is therefore not rapidly rising rents, but a combination of entry prices, market liquidity and local demand that differs from Auckland’s. For investors, a property must be rentable, but they also need to consider how easily it could be sold a few years later.

Invercargill and Southland also show some regional advantages. The median time for listings to leave the platform was 50 days in Invercargill and 59 days across Southland. Lower entry prices may deliver higher returns on paper, but investors still need to assess local employment, rental demand and the size of the future buyer pool.

The available data is insufficient to prove that investment money is flowing into these South Island cities on a large scale, but it does show that investment conditions now differ markedly between regions.

Choosing the city matters more than simply entering the market

New Zealand’s residential investment market is undergoing a reassessment of different investment strategies, rather than a collective exit by all investors.

Independent economist Tony Alexander describes this process as a readjustment, filtering and stabilisation of the investment market. He believes those who remain in the market will increasingly be investors focused on long-term ownership, rental yields and professional management, rather than buyers simply expecting short-term capital gains.

Auckland has not lost its long-term standing in the market, but higher house prices and relatively low gross rental yields mean investors need to commit more capital and remain patient about long-term appreciation.

Some Dunedin student homes can offer higher gross yields, but buyers need to understand the local student rental cycle. Christchurch listings move more quickly, but rents have not grown significantly. Lower-priced markets such as Invercargill may offer more attractive returns on paper, yet the depth of the market when it comes time to sell may not match that of larger cities.

It is increasingly difficult to describe New Zealand’s entire housing market with the idea that prices will eventually rise wherever you buy. The same amount of money invested in different cities, neighbourhoods and property types may produce completely different results.

In the past, many investors first asked how much house prices might rise. Now, they need to ask: Are there reliable tenants locally? How much rent can the property actually earn? How much will remain after expenses? Will there be enough buyers in the market if they need to sell a few years later?

Auckland may no longer be the only first choice for investment, while the South Island’s higher-yielding markets also carry risks. Some investors have stayed in property and are beginning to redraw their investment plans using more careful calculations.