By Herron Todd White
October 2019

The residential property market in general in the South West of Western Australia does not, as a rule, take yields into consideration. Yes, investors want good returns adequate to cover the annual costs and help pay off the mortgage but it is capital growth that underpins most of the investor market in the South West.

If you are after return on investment in the residential market, then the short stay accommodation market may be your thing. However, these also have their issues. High strata levies and expensive management and cleaning fees eat into an income which is very seasonally dependent. On top of this in general there has been very little capital growth in the short-stay market.

The Airbnb market has increased significantly in the region over the past years to such an extent that it has limited the supply of rental properties on the market. In some instances, this has placed upward pressure on rental values in peak holiday periods.

Properties which have a mix of both short stay and permanent use become more attractive, particularly if they are well located and with good views. These properties can benefit from high returns in the holiday seasons and modest returns in the off-seasons. They are also more likely to benefit from capital growth.

There has been an increase in demand for properties which have the potential for a little income on the side, such as properties with granny flats or a second dwelling which can be rented out on either a short stay or permanent basis. The Shire of Augusta-Margaret River now permits granny flats and second dwellings to be leased on a permanent and short term basis which increases the options available for extra income. Agents have indicated that this sector of the market is on the rise. It is also having an influence on the design of new homes so as to allow for Airbnb style accommodation.

Rental income be it short stay or permanent is important to cover costs but capital growth is still king.