By Herron Todd White
Sunshine Coast Property Updates
Investors in the Sunshine Coast property market have been pretty active over a number of years. Market sentiment has improved which has in turn instilled confidence in the marketplace. The main driver of this sentiment has been the major infrastructure projects currently under way across the coast. The current low interest rate environment has also had investors looking to property to increase their returns. Across the coast, gross yields normally tend to range between 4% and 15% which reflects the relative risk on investment.
Properties situated within areas underpinned by re-development potential or situated in unique and sought after locations tend to be at the lower end of the yield range. A yield at the higher end of the range indicates the location, condition of the property and the additional maintenance costs required. Units within the main tourist precincts can also achieve gross yields up to 15% however with high body corporate and management fees, these properties tend to show net yields in the 2% to 6% range.
There has been a large increase in dual occupancy homes constructed across the coast with a main dwelling typically providing threebedroom accommodation and an attached one or two bedroom unit. These properties have been primarily purchased by investors and have been selling with gross yields between 5.9% and 6.3%.
Slightly higher yields can be achieved through the hinterland townships with properties comprising three to five flats in the Nambour area achieving yields in the 7% to 8% range. Typically, these properties are older with ongoing maintenance required.
In the prestige market, we have started to see an increase in the number of investors. This market is typically difficult to gauge given that there are a number of different drivers in the investment decision. This market is closely related to the southern markets of Sydney, Melbourne and Brisbane, so at the moment has been pretty good. A number of investors in this segment are certainly purchasing for a position or lifestyle choice and in quite a number of cases, with a view to the investment being the future retirement home and principal place of residence. Therefore, a higher yield is not always driving the purchasing decision.
All in all, the investment market on the Sunshine Coast has been pretty healthy.
Speak with a Sunshine Coast Mortgage Broker today.
Rockhampton Property Updates
In the Rockhampton region, yields have always been a strong consideration for the investor market as we do not suffer the significant price fluctuations of the larger city markets. Any capital gain to be had in our region is therefore a long-term commitment. A high grossing yield provides the incentive to remain in the market.
On the other hand, most investors coming into the Gladstone market are more looking for short to medium term capital gains, especially given the timing of the current market cycle.
The current state of the Rockhampton and Gladstone markets is considered to be at the early stages of recovery, so typically now is the best time to achieve a higher yielding property while values remain at an affordable low and rents are starting to creep up after a consistent tightening trend of vacancy rates over the past 18 months to two years.
Across the Rockhampton and Gladstone regions, the type of investor varies greatly from the typical mum and dad investor who may have one house other than the family home, through to interstate investors who invest significantly in the region via the purchase of multiple dwellings or sets of flats. Whilst rarely seen, there is also a small degree of foreign investment.
The emergence of the Rockhampton Riverfront precinct over the past ten years has also provided the opportunity to hold a holiday unit and receive the higher return over peak periods, or the benefit of a dual key arrangement, although there is a limited market for fully serviced apartments in our region. Gladstone has a significant supply of inner city apartments operated as serviced apartments aimed mainly at corporate travellers as well as tourists.
Non-traditional income producing properties (such as Airbnb) are less common regionally, with little evidence available to determine a yield. There are however the occasional peak periods where traditional short-term accommodation cannot cater to the market, such as during the Beef Australia events held every three years, where Airbnb is extremely effective, however this is not an ongoing source of income throughout the year
In the residential space, it is unlikely that a standard suburban home would attract what investors would consider to be a high yielding return on investment, depending on the location.
A typical ten year old, four-bedroom home that may sell for $470,000 may only provide a gross yield in the order of 5% to 5.5%. This type of yield reflects the low-maintenance nature of the property. An entry level home in the older, established areas of Rockhampton will be more attractive if assessed on a yield basis only, for example a 1940s high set three-bedroom fibro home, not directly flood affected (becomes isolated during flood periods) may sell at around $160,000 and provide a gross yield somewhere between 7% and 8%. Whilst this may be more acceptable to most investors, there is likely to be higher levels of expenses involved with maintaining the property which would affect achievable rental income.
Gladstone properties reflect similar yields, however the price points differ slightly. A typical five to ten year old, four-bedroom home in Kirkwood or New Auckland would sell for around $300,000 and would reflect a gross yield in the order of 5% to 6%. An older 1960s high set, three-bedroom home in a central suburb such as West Gladstone or South Gladstone would typically sell for around $200,000 and provide a gross yield somewhere between 6% and 8%.
The best high yielding property type in our region is flats or multiple properties on one title. Due to the multiple occupancy nature, the income generated is often at least double traditional residential housing. Whilst we have example after example of traditional sets of flats achieving gross yields typically in the high 7% to low 8% range (buy in prices around the low to mid $300,000s), there are still some rare opportunities out there. A recent sale of a two x two-bedroom duplex in Koongal for $210,000, reflects a gross yield of 9.9%. It is difficult to beat a near 10% return on a residential property in this region. This property then may benefit from the potential to increase the yield through a renovation and in turn increase the annual income able to be generated by the duplex.
Speak with a Rockhampton Mortgage Broker today.
Bundaberg Property Updates
The REIQ residential vacancy rate for Bundaberg remains low at approximately 1%.
There has been a moderate amount of sales of flats in Bundaberg over the past 18 months. They range from an older style 1970s eight-bedroom, fourbathroom flat complex which sold for $550,000 with a weekly gross rental of $920, giving a gross yearly rental of $47,840 providing a gross yield of 8.6%, to a more modern on ground, circa 1994, brick, eight-bedroom, four-bathroom flats building which sold for $615,000 with a weekly rental return of $830 giving an annual return of $43,160 and a yield of 7%.
The most recent sale was an on ground, circa 2018, brick flats building providing eight-bedroom, fourbathroom accommodation for $965,000 providing an approximate gross yearly rental of $60,320 which is an approximate gross yield of 6.2%.
Speak with a Bundaberg Mortgage Broker today.
Hervey Bay Property Updates
Hervey Bay has been experiencing steady rental levels over the past 12 months after a period of growth for the 12 months prior. The vacancy rate has been sub- 2% for an extended period now and rental pressure has seen rental rates improve across most asset classes.
According to the REIQ’s Monthly Monitor, median weekly rents rose across a number of dwelling types according to the annual measure. Threebedroom houses recorded a median weekly rent of $310 (up $10), two-bedroom units had a median of $263 (up $13) and three-bedroom townhouses came in at $330 (up $2).
House yields held relatively steady at 5.1% this quarter, up 0.2% from the previous quarter. Unit yields rose by 0.7 percentage points over the December quarter 2018. Units are achieving an overall median rent of $263 per week compared to the September 2018 quarter result of $255 per week.
The Monitor suggests that the rental market may continue to fluctuate seasonally, but gently rising median rents indicate the sector is generally firming.
Most dwellings with three to four bedrooms can achieve $340 per week at a minimum with gross yields typically above 5% per annum. Duplexes or blocks of flats can generally achieve a higher return than a standard dwelling, however buyers beware that any capital works required will cut into your net return. Single units typically realise a lower gross yield due to additional body corporate costs.
Speak with a Hervey Bay Mortgage Broker today.
Emerald Property Updates
We have seen rents continue to rise across the Central Highlands towns of Emerald, Moranbah and Blackwater over the past two years. Some areas are now looking attractive. Gross yields on houses in Emerald range from 5% to 7%. We see this yield for most market segments from $250,000 to $450,000.
For multi-unit flats, the gross yields on sales have shown 7% to 10% regardless of the price point.
Rents are firming and tightening again as there appears to be another kick in the market currently happening.
In Moranbah, the gross yield is moving higher to where some houses are seeing near 10%. It’s not uncommon to see a modern four-bedroom home renting at $600 to $650 per week and valued at $350,000. Some of the older two-storey homes that might have dual accommodation (upper and lower level) and a total of seven to eight bedrooms (set up for single occupant accommodation) are hitting the gross yield of 10% on a sale price of $350,000.
Mackay Property Updates
Between 2013 and 2017, it was a pretty tough slog for investors in residential real estate in Mackay. The downturn in the resource sector and flow-on effects to Mackay have been well documented in this column, but are important to give context in the current market. Rental vacancy rates blew out significantly from around 1% to a high of 9.4%, with market rental values falling between 30% and 50%. Investors all but left the market during this period, putting greater pressure on values of purely investment grade stock, in particular flats and units.
However, over the past 12 to 18 months, the tide has definitely started turning. Rental vacancy rates have been falling over the past two years and currently sit at just below 2% with market rental values increasing throughout this period. In fact, the rate of increase in rental values rose faster than any increase in capital values during this period, meaning yields are increasing. This fact alone, with the prospect of increasing capital values in the medium term, is making Mackay a great place to invest at present.
So, what are the yields being achieved at present?
For residential dwellings, gross yields currently sit between 5% and 6%, with the higher yields currently available on lower value dwellings. The minimum rental levels in Mackay have been rising steadily, allowing greater yields on these properties. The risk is the older properties may require capital expenditure and repairs and do not reap the depreciation benefits on more modern properties.
In terms of gross yields only, the highest yields currently available are with units. Unit values fell significantly in the downturn and have only started to increase slightly since. For example, an older style walk up two-storey attached unit in close proximity to the CBD can still be purchased for under $150,000, with some recent sales as low as $110,000. These units can command a rental of between $180 and $200 per week giving gross yields of between 7% and 8.5%.
Just a word of caution, these rates are gross yields only and do not take into account the higher costs of insurance and body corporate levies in Mackay or rates payable.
Speak with a Mackay Mortgage Broker today.
Townsville Property Updates
There is a general perception that the Townsville economy has been through the worst and there is a new air of expectation of improvement and consolidation over its immediate future on the back of a strong pipeline of projects underway or yet to commence.
Townsville currently offers some good yield investing opportunities with a median house price of $320,000 as at June 2019 and the current trend median rent for houses at $360 per week. The rental market tightened significantly following the February floods and although it has now eased somewhat, it remains tight, trending at under 2% vacancy according to our latest rent roll survey.
We are seeing anecdotally increased investor interest including some investor groups acting on behalf of buyers seeking properties offering good yield returns and capital growth potential.
In the current market, units are generally seeing higher yield returns due to the lower buy in cost and the trend median rent of $285 per week as at June 2019. We have seen some evidence of yields over 8.5% being achieved for houses in areas within the 4815 postcode due to the low buy in cost and the current rent being achieved on the back of the tighter rental market. Houses located closer to the city centre are typically showing lower yields due to the higher buy in cost, however, the potential for capital growth in these areas in the shorter term is also more positive.
Overall there are many suburbs throughout Townsville where solid yield investing options are available, particularly if not seeking short to medium term capital growth, however it is important to note that yields will vary based on demand and supply in the rental market and therefore it is important to take into consideration buying an investment property that will appeal to a wide range of potential renters.
Speak with a Townsville Mortgage Broker today.
Darling Downs/Toowoomba Property Updates
Investors in the Darling Downs have generally been attracted to low-maintenance properties such as new or near new four-bedroom, two-bathroom, two-car detached dwellings, two-bedroom units and six-bed, four-bath duplex pairs.
The majority of the Toowoomba investor market tends to operate in the sub-$400,000 segment for dwellings, sub-$300,000 for units and sub- $550,000 for duplex pairs. It’s unclear whether investors are favouring strategies to seek higher yields or focusing on capital gains. With a slow-moving market at present, investors are possibly seeking a blend of the two strategies.
Some of the western suburbs such as Glenvale, Cotswold Hills and Cranley, and outer lying satellite suburbs including Wyreema and Cambooya have tended to be hot spots for investor activity over recent years. This is most likely a result of englobo land availability, with the established suburbs unable to accommodate new development. Yields in these newly developed areas are moderately attractive to investors at circa 4% to 5% for houses and 5% to 6% for units and duplex pairs, however, these returns may come at the expense of capital growth.
Buyers seeking to invest in the Toowoomba area could consider purchasing in older suburbs close to the CBD such as Centenary Heights, Darling Heights, Kearneys Spring, Newtown, North and South Toowoomba. These areas still generate acceptable yields and arguably have greater potential for capital growth due to their proximity to the CBD and services. A recent trend within the established suburbs in areas close to boarding schools, hospitals or the CBD is short term letting utilising platforms such as Airbnb and Booking.com. We have witnessed yields up to and exceeding 10% in select cases, however, this comes with intensive management, including managing bookings, financial management and very regular and intensive cleaning.
The smaller towns throughout the broader Darling Downs region can show higher yields anywhere from 5% to 10%. Once again, these higher returns come with a higher degree of capital growth risk.
Investor interest in Toowoomba and surrounding areas has significantly slowed over the past two years resulting in a reduction in sale volumes, however, vacancy rates have declined to sub-2% and rental rates have shown moderate growth. This may lead to an increase in investor activity throughout the Toowoomba region.
Speak with a Toowoomba Mortgage Broker today.