Trans-Tasman Rivalry: Is AU or NZ better for property investment?
Australia and New Zealand have always been rivals. Whether we’re competing on the rugby field, in terms of economic growth or debating which country is the most liveable – there has always been healthy competition.
Both country’s property markets have boomed in past years, but which has grown faster and which is the better option when it comes to property investment? This is yet another Trans-Tasman rivalry that could be too close to call.
Australia’s average property price is around $180,000 AUD more than New Zealand’s.
When investing in property, price point is usually one of the most important factors to consider. New Zealand may have the edge on this front, with a national average price of just $529,000 NZD, according to data from the Real Estate Institute of New Zealand (REINZ).
Research from the Australian Bureau of Statistics shows that across the Tasman the average price is $669,700 AUD. That means Australia’s average property price is around $180,000 AUD more than New Zealand’s.
Note that Australia’s number is driven up by Sydney and Melbourne, both of which have an average price close to $1million. Other capital cities such as Canberra and Brisbane also have high average price points, but outside of the capital cities CoreLogic RP Data shows that the average price is only $390,000.
Similarly, outside of Auckland New Zealand house prices average $431,000, according to REINZ. This shows that there are parallels between both markets and that in terms of affordability if you buy outside of the main centres they are closely matched.
The verdict: New Zealand wins
Australia’s property market is far larger and more diverse – with a net worth of over $6trillion.
Capital gains have been the bread and butter of property investors in Australia and New Zealand for the last decade or so. But in both markets there has been talk of a slowdown with Melbourne, Sydney and Auckland right in the thick of it.
In the current market which country is seeing the best capital gains? REINZ data shows that property values grew by an impressive 11 per cent in New Zealand over 2016, while CoreLogic’s research shows Australia’s growth was near identical at 10.9 per cent.
However, Australia’s property market is far larger and more diverse compared to New Zealand’s market. It has a net worth of over $6trillion whereas New Zealand’s market is worth less than $1trillion. This means that there is more choice when selecting a location and also that there are more areas outside of large centres enjoying large value gains.
For example CoreLogic’s Best and Worst Property Resales report identified Ashfield in NSW, Hobsons Bay in VIC and Redland in QLD as some of the fastest growing areas in the country. While there are impressive capital gains to be had all around New Zealand, its smaller market simply can’t match Australia’s for diversity.
The verdict: Australia wins by a nose.
SQM Research’s data puts the average rental yield for a three bedroom home in Sydney at roughly 3 per cent
It’s incredibly difficult to compare Australia and New Zealand’s property markets when it comes to rental yields, mainly because both markets are so diverse. Some areas may have average yields of 10 per cent, whereas others may be as low as 2 per cent.
For that reason, and for the sake of fair competition lets compare the market in each country’s largest city – Sydney and Auckland. SQM Research’s data puts the average rental yield for a three bedroom home in Sydney at roughly 3 per cent, which is fairly low.
On the other hand, Interest.co.nz’s rental yield indicator shows that yields in Auckland range from 3.5 per cent to 4.6 per cent. It would appear that Auckland has the advantage over Sydney here, even in central suburbs like Avondale where the average yield is 3.6 per cent.
Combined with the capital growth on offer in Auckland those relatively high yields make the city an impressive investment location.
The verdict: Auckland and New Zealand win.
Is there an overall winner?
When investing in property it’s important that you research specific areas and suburbs you’re considering, as well as the movements of the market as a whole. Plus you must consider if the market you’re looking at will best serve your unique needs, whatever they may be. For that reason, it’s completely impossible to call an overall winner between Australia and New Zealand as property investment locations.
It’s clear that both markets offer a wealth of opportunities and as you know diversification is key to investment success. If you’ve already purchased property in Australia and are looking for more it’s always worth considering investing in New Zealand (and vice-versa). That way you’re not putting all your eggs in one basket and you may be protected if one market falters.
To get the ball rolling on your Trans-Tasman investment get in touch with a real estate agency that you trust, for the help and professional advice that you need.