Property Market Information: Buying investments for yield

By the resi financial blog team, 28 November 2014

Property Market Information: Buying investments for yield

We all know where there have been fantastic jumps in property prices - it's in the news almost all the time. And those are the areas that are usually pretty expensive to get into in the first place, like the inner suburbs of Melbourne or Sydney. While that may be an investment strategy for some, for those looking for a high yield, there is some news for you from RP Data.

Top spots for rental yield

The factors that generate a good capital gain usually adversely affect rental yield, as house prices are the denominator in the cash flow equation. In order to get a good yield, you will typically be looking for a high rent in an area where house prices are low.

A good way to find houses like these is to look in towns or suburbs that are experiencing an out-of-character boom. This could be a mining town, a suburb with new infrastructure developments or a city with a temporary influx of jobs due to an enormous event.

Looking at RP Data's November 27 report on the top 10 suburbs for rental yield, it is mostly towns involved in the primary industries sector that feature prominently. These are areas where people have moved to be involved in mining, LNG production or farming and need a house to rent.

Sixty percent of the list is found in Western Australia, 20 percent is in Queensland, while Tasmania and New South Wales each have an entry in the top 10. Pole position is assumed by Miles, QLD, specialising in LNG production in a rural setting, tied with Newman, WA, a mining town. These two towns clocked in at 9.8 per cent yield.

The tail end of the list still has an impressive return on investment figure, with Cloncurry in Queensland's North West raking in 7.9 per cent. A cattle-grazing town, in 2011 the population was a mere 2,804, with a rate of home ownership of 38.5 per cent, according to the RP Data report.

Spotting a good buy

Keeping an eye out for government proposed infrastructure projects and new resource initiatives may be a good way to stay ahead of the trend in terms of finding the best properties for rental yield.

Whether your preference is for a property with high capital gain, or you are getting a home loan for an investment property with high yield, the diverse Australian real estate landscape will no doubt have room for you to start your portfolio.

If you need help getting started on the road to successful property investment, stop into your local resi branch to chat to one of our loan specialists - they'd love to help!

Categories: Home Loans, Property Investment