Forget high-priced inner city properties. More affordable units and houses are delivering the best returns in the country, particularly in regional areas.
Investors should stop chasing high-priced inner city properties and look at more affordable houses and units, particularly in regional areas, if they want to maximise rental returns, according to new figures from Residex.
The analyst group has compiled a list of the top 10 performing locations in Australia for rental returns, many of which cost less than $360,000 to buy into but deliver very strong yields:
Units in West Perth deliver the highest rental returns of any property type in any location across Australia, with a median value of just $301,000 but a yield of 8.68 per cent.
The list shows that country towns in Queensland, Victoria, Western Australia and Tasmania account for 6 out of the 10 top performers, which cost less than $200,000 to buy into but return yields above 7 per cent. However, it comes at the expense of woeful-to-weak levels of capital growth (at least in the short-term).
It’s clear from the data that capital cities remain the place to strike a balance between these two competing concerns, but it means investors will have to spend a lot more to get into the market.
For example, houses in Darwin’s suburb of Lyons had a median value of $319,500 after prices grew by 14.66 per cent in year to September. The yield was a very healthy 7.98 per cent.
Still, Lyons represents something of steal in terms of the broader Darwin investment market, with the median house value at $521,000 after growing 9.07 per cent. The city’s median yield is just 5.31 per cent.
Of course, this is just a snapshot of the market taken at a single point in time, but it illustrates a few of interesting trends.
First, rapid price growth in Australia’s capital cities – particularly in the inner areas -- have made regional areas more attractive for investment, particularly for investors who prefer cash flow over short-term capital growth.
Second, cheaper properties offer many investors the only shot where they can hope to buy into the market and still see decent rental returns.
Finally, units are increasingly delivering better rental returns and capital growth rates than houses as affordability problems get worse in the traditional housing market.
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