Originally Posted by
Beagle
For what its worth I think the average Auckland house price at $1.2m at about 12 times average combined household income is probably unsustainable so the capital growth prospects from here are probably very modest and the prospect of a fall in the medium term should not be overlooked..
I very recently looked at a property in West Auckland on a gross yield of just over 6%, (net just on 5% if I managed this myself) and decided against it.
One of the key reasons was the risk of tenant damage and most specifically meth contamination. Another was the inability to deduct the legitimate business expense of mortgage interest which means for the investment to be effective I would have to own it unleveraged. Frankly I can get much better returns on my capital elsewhere.
We have previously owned two apartments close to Lynn Mall and found them very problematic on a number of fronts. Budgeted yields with residential apartments are one thing, what you really get after inadvertent and willful damage, non payment of rent and other delinquent tenant behavior is quite another thing and that's before you even start thinking about possible moisture ingress and meth contamination risks and remediation costs, issues that are FAR more common than you think. Believe me as an accountant I have seen some absolute horror stories in my long career. It may look okay on a spreadsheet, in the real world its quite another thing entirely.
I would say residential apartment investment is substantially more risky than shopping malls.