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Bank vs Property: What’s Best For You?

Andrew Bruce
Andrew Bruce
Branch Manager / Business Owner

Term deposits have not fared well and have been on the decline for years. In 2020 they finally slumped below 2% and with mortgage rates expected to continue to fall, it’s difficult to see how the returns offered by a term deposit will improve in the near future.

Let’s compare the return on term deposits with recent sales of investment properties. Below is the return before tax you would receive on a $1,000,000 investment.

Industrial Properties1

Yield: 4.5 – 5.5%
Annual Pre-Tax Return on $1m Investment: $45,000 – $55,000

Office Properties1

Yield: 6 – 6.5%
Annual Pre-Tax Return on $1m Investment: $60,000 – $65,000

Retail Properties1

Yield: 6 – 7%
Annual Pre-Tax Return on $1m Investment: $60,000 – $70,000

Bank Term Deposits2

Yield: 1 – 1.2%
Annual Pre-Tax Return on $1m Investment: $10,000 – $12,000

1 Average yield of investment sales, May – September 2020. Source: interest.co.nz
2 Term deposit rates of four major retail bank (ANZ, BNZ, ASB, Westpac as at 7 October 2020. Source: Interest.co.nz

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