By Herron Todd White
Greater Geelong Property Updates
Investing in Geelong has been a trend that many are beginning to follow in recent times. With Melbourne’s property market finally at ease leaving median house prices at an all-time high, Geelong has caught the eye of many investors for its value and unique growth opportunities.
Geelong boasts a number of the factors that make an area stick out as a place with high growth potential. Some of these factors include large infrastructure projects currently underway, vacancy rates and rental yields that continue to increase and a population that is growing.
In terms of yields, the vast majority of Geelong’s suburbs have a gross rental yield higher than that of the Melbourne median, which is 2.7%. Like Melbourne, Geelong also has its own array of estates being built around the city, with Armstrong Creek being an enticing new development with yields at 3.7%.
Geelong’s ongoing infrastructure advancements has lured a number of investors towards the town. Just last year, an unexpectedly strong net rental yield got investors from across the nation to build an upscale 4.5 star apartment building with 110 apartments to be sold. Each one of these apartments produced a net rental yield of between 6% and 8% (source: Core Logic). Demand for this type of development is high in Geelong because of the increasing numbers of overnight visitation, with a 15% spike in the year.
In terms of residential areas, suburbs such as Bell Park, Belmont, Torquay and Curlewis are the ones to look out for (source: SQM Research). Curlewis in particular has performed in spectacular fashion over the past 12 months as it has seen median house prices increase in value by 13.23%. To top things off, it has one of the highest yields amongst the entire district at just under 4%. The above graphs illustrate the 24-month growth in median house prices and sales numbers for Curlewis (Source: Core Logic).
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Mildura Property Updates
The rental market in Mildura has been tight in recent years, with agents reporting very low vacancy rates. Rents have been steadily increasing as a result. Gross yields of around 6% are typical for cheaper houses, in say the $225,000 to $275,000 range, stepping down to around 5% for more expensive houses in the $300,000 to $400,000 range. Investors who buy cheaper residential units can expect to get higher gross yields of up to 7%, however, this has in the past been counterbalanced by reduced potential for longer-term capital gain.
Investors also need to be mindful of the need for maintenance and eventual upgrading when buying older units or houses.
Demand for rental housing appears to come from a range of tenants and we regularly hear of families who move to Mildura for employment reasons (teachers, police officers etc.) having difficulty in finding suitable rental accommodation.
The growth in the areas planted to table grapes and citrus in the Mildura region has also created demand for seasonal workers and it is clear that there is a shortage of cheaper accommodation options for this sector. Many older houses and cottages scattered throughout the surrounding rural area, together with a number of old motels are now generating comparatively strong rental returns as a result of being let to these seasonal workers.
Our advice to investors is always to buy a property that you could imagine living in yourself. There are numerous examples of compact four-bedroom houses that have been built intentionally for the rental market and which have little if any verandah areas. Mildura’s long hot summers are always more pleasurable when there is a covered outdoor area and we would expect tenant churn will be higher in the plainer homes that are not well suited to our climate.
While yields are generally lower for newer homes and units, there will be lower maintenance costs and also the potential to claim depreciation allowances. We recommend any investors who would like to consider the option of claiming depreciation allowances contact our office for more details.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.