My company has just sold a residential property in Manukau for $280k with a rental of $400/week, giving a cashflow return after rates, insurance and maintenance of 6.35%. Plus it is subdivisible. Rents in Manukau are increasing at 3-5% pa. Even so, it is not worth subdividing at this current time such is the weakness of the market. For those intending to hold for a few years it could be a good thing though. We have taken a good margin and moved on........we have another one showing 6.6% net but not subdivisable.

The good news is that in large parts of NZ you can fully fund a rental property out of cash flow even without even needing the now disallowed depreciation deduction to balance things out, and with the rental market on an increasing trend plus replacement cost increasing all the time the future for investors actually looks OK.