Strong yields attracting investors

posted in: Property investment, Research | 0

More than 150 postcodes across Queensland have recorded gross rental yields of 5 per cent or more, according to the latest Real Estate Institute of Queensland (REIQ) data.

The REIQ December quarter gross rental yield report, released today, found that yields were particularly firm in mining regions as well as areas which offered affordable housing.

Our property market has turned a corner over the past six months, and these robust yields reflect that sales prices had yet to fully rebound in the December quarter last year but rents had definitely increased.

This year, there continues to be strong demand for rental properties from tenants which in turn is driving activity from investors.

REIQ analysis of Australian Bureau of Statistics (ABS) housing finance data found that the number of investors in the Queensland property market in February had increased more than 10 per cent compared to January this year.

The top three performers for gross rental yields for houses by postcode were Miles at 9.3 per cent, Russell and Macleay islands with 9 per cent, and Mount Morgan on 8.7 per cent.

At number one, Miles is located in the Western Downs region and is set amongst the rapidly expanding Surat Basin Energy Province. Its location means that the region has experienced significant property price growth and increased rents over the past few years.

At number two was the Brisbane bay islands of Russell and Macleay which boast plenty of affordable houses as well as a healthy rental market.

Number three was Mount Morgan, in the Rockhampton local government area, which regularly features on top yield reports due to its affordable property prices.

When it comes to units and townhouses, the top areas generally have affordable buy-in prices to underpin their yield performances.

Two postcodes tied for the number one position. The postcode that includes Holloways Beach and Yorkeys Knob in Cairns recorded a gross rental yield of 8.2 per cent. This result can partly be attributed to the period of subdued unit prices following Cyclone Yasi in 2011.

Equal number one was Chinchilla, which is another location within the Western Downs region. Similar to Miles, Chinchilla has experienced strong sales demand as well as rental growth over recent years due to the booming resources sector.

In the number two and three spots were both postcodes within the Logan City region of Greater Brisbane. Woodridge posted a gross rental yield of 7.8 per cent, while Slacks Creek recorded a yield of 7.7 per cent. Both of these postcodes have affordable property prices but are home to a large rental population.

The top performing postcode for Brisbane was again Brisbane/Spring Hill with a yield of 6.4 per cent due to the strong concentration of renters in this inner-city region.

The REIQ gross rental yields use weighted median rents and sale prices to derive yields, which is the annual income earned from a tenanted property divided by the purchase price.

They are referred to as gross yields as they do not take into account costs associated with the original purchase or the ongoing costs of owning an investment property such as mortgage repayments.

Our gross rental yields are also classed as short-term yields as they reflect current pricings.

However, if you hold your investment property over the long-term – which of course is always advisable – then the yield improves given rental income has increased but your original purchase price had stayed the same.

Click this link below to download the data: 

REIQ Gross Rental Yields – December Quarter 2012 (Microsoft Excel Spreadsheet)