Which Hamilton suburb has the highest rental yield?
This is a question we are often asked by experienced and first time property investors alike. So, we got our calculators out and did our homework...
How we crunched the numbers
Using data from the Bond Centre we can back out the weekly rent for rental properties whose bonds have been lodged that month. The most recent data available is for December 2021. We have data on all property types but for the purpose of this study we chose to concentrate on 3-bedroom rental properties as they represent the most active segment of the rental market.
Next, we grabbed the lower quartile sale price data for each suburb. Ideally, we would have just used sales data for December 2021 (to match our rental data) but some suburbs did not record enough sales in one month to draw proper conclusions. So to smooth out the sales data we analysed data from Jan-Dec 2021.
Errr, what does ‘lower quartile’ actually mean and why do we use it?
The lower quartile (LQ) is the value under which 25% of data points are found when they are arranged in increasing order. So, if you took 100 children and stood them on a line in height order, shortest to tallest, then the LQ height would be the height of the 26th child in the line. We can apply the same methodology to house prices.
Property commentators and journalists most often refer to median or average house prices but we think that rental properties are generally around the LQ price range, so it makes more sense to use those LQ sale prices to calculate our suburb yields.
Okay, enough of the suspense. Here are the results…