Follow renters for yield
It’s the areas with a lot of development that will give investors good returns, writes Property editor Michelle Hele
WITH the majority of new apartment development stock currently being aimed at and sold to investors, finding the suburbs where renters want to be is more important than ever.
The same goes even for those who want to buy existing investment properties. If you buy where the renters are already looking, you are much further along the path to securing a tenant.
Figures from the Residential Tenancies Authority show postcode areas including Brisbane/spring Hill, New Farm/teneriffe, Bowen Hills/fortitude Valley/newstead, South Brisbane and Kangaroo Point are the most popular suburbs for renting at the moment in terms of having the highest level of new bond lodgements.
According to analyst Lachlan Walker from Place Advisory, there are some up-and-coming areas which are clawing their way higher up that list, including Ascot and Hamilton.
He says the extensive development around the Northshore Hamilton precinct would be responsible for this as hundreds of new apartments are being built and bought by investors.
Michael Matusik says there are currently 440,000 rental properties in Queensland, up about 7 per cent on 12 months ago.
Figures from RP Data drawing on 2006 Census data reveal Bowen Hills has one of the highest levels of properties which are rented.
The suburb is also a development hotspot with a number of significant residential towers already under devel- opment and others proposed along with the redevelopment of the RNA.
Other inner-city suburbs feature prominently with rental properties, but so do suburbs well outside the inner ring, particularly more affordable suburbs where investors can buy in reasonably cheaply and there are lower levels of owner-occupiers.
This includes suburbs such as Carole Park, Gailes and Inala and Woodridge. Median house prices in those areas range from $245,000 to $285,000.
Mr Walker says there is commonality of the suburbs with high levels of rental properties.
The inner-city ones are in wellestablished precincts, Gen Y dominated regions and are close to activity and entertainment.
Inner and outer suburbs have strong public transport and quick travel times.
‘‘Probably the most important factor, however, is employment opportunities and the availability of future employment opportunities,’’ he says.
He says investors would be well positioned if they want a good place to buy a property to look at areas which are seeing a lot of development now.
The development market has swung around from a few years ago when there was a lot of luxury stock being built for the owner-occupier market.
‘‘A lot of stock (being built at the moment) is investment-grade stock,’’ Walker says. ‘‘Around 80 per cent of the new product that is being sold is to investors.’’
He says those looking to invest in these areas should be looking at yields not capital gains, as property values have climbed little recently, so it is yields which are most attractive to investors.
‘‘What we have suffered in capital gains (dropping), we have made up in yields,’’ he says.
And with values not expected to rise significantly in the next few years, yields are a more important factor.
He says suburbs such as Bowen Hills are definitely going to perform and in the long term may overtake New Farm and eventually the inner city in terms of popularity with renters.
According to RP Data analyst Cameron Kusher the most popular for renters tend to be in inner-city areas.
‘‘Which is in line with the fact that most residents aspire to also live in these suburbs,’’ he says.
‘‘Over the years this trend hasn’t changed too much. However, urban renewal projects have seen suburbs such as Newstead and New Farm become more popular as a greater volume of high-density housing has allowed more residents to live in there.
‘‘In the coming years, similar urban renewal of areas such as Bowen Hills and Woolloongabba are likely to see the popularity of these suburbs increase.’’
HOT SPOTS: Inner-city suburbs such as Teneriffe (top) and South Brisbane (below) are popular with renters, while outer suburbs such as Inala (above) are more affordable for investors to buy in.