19/09/2024
Four reasons to invest in Dunedin and one reason not to
On top of being an excellent place to live, Dunedin's also a good area to invest in. The economy is quite well diversified for the size of the city and there are different types of roles available from construction at the new hospital through to tech.
Here's my top four reasons to look at Dunedin seriously as a destination for residential investment:
1. Dunedin has good yields
Looking at interest.co.nz's rental yield indicator, Dunedin is the only city with a population above 100,000 which has a median 3 bedroom yield of over 6%. You have to go to Invercargill, Whanganui, or Rotorua to get similar yields.
2. Dunedin has enough ratepayers to spread the burden of infrastructure
With a population of around 125,000 across the wider Dunedin area, local infrastructure costs are divided among a large ratepayer base. Even including the ORC rates, the overall percentage of your annual rent that you spend on council rates is reasonable when compared with other smaller cities with similar yields.
3. The economy here has multiple sectors
Dunedin's economy is well diversified with many different sectors of employment. Yes we are going through a recession at the moment and the number of jobs is well down on 2022, but the variety of employers along with the university means that there's stability. Many smaller cities with similar yields are reliant on one or two large employers. We've unfortunately seen the risks of employment concentration play out in the sawmill closures in Ruapehu which is going to gut some of these smaller towns.
4. Access to multiple maintenance contractors and good landlord supply chain infrastructure
Landlords need good access to services in the city they buy in. Dunedin has a good number of tradesmen and other landlord services in the city. This means maintenance can be done at a reasonable rate, there are spare parts available for any appliances which break, and we can arrange maintenance in good timeframe.
One reason that means Dunedin might not suit your investment strategy:
1. It may be harder to find a super high gross yield in Dunedin
Dunedin's gross yields are lower than that of smaller cities such as Whanganui, Invercargill, or the Central NI. You might get higher gross yields in these areas, 9-10% returns are not uncommon. However these smaller cities have much higher council rates and a lower weekly rent, which means your net yields might end up coming out the same or lower.
Where do you see as a good investment destination? Let me know in the comments below.
