The bounding regional hotspots delivering high price growth, rental yields
Property investors are frequently told they can have capital growth or high rental yields but not both, however, an array of regional locations around Australia are bounding at full speed in both those measures and dispelling that myth.
Many regional Australian towns are still offering investors above average returns, despite prices having already recorded strong growth over the past two years.
Our analysis has identified 50 locations where investors can still buy affordably, achieve yields above 5 per cent (and in many cases above 7 per cent) and solid price growth, and 31 of them are in regional Australia.
The most recent Regional Movers Index shows that the regions are still popular with 24.9 per cent more people moving from the city to the regions compared to back in the other direction.
And while coastal locations like the Sunshine Coast and Gold Coast continue to attract a large percentage of those moving to the regions, they are not necessarily the best performing regional property markets.
Several of the locations on our Top 50 list have recorded capital growth above 10 per cent in the latest quarter alone, which can equate to tens of thousands of dollars.
As well as wanting to achieve good capital growth, investors are increasingly yield-conscious but the median rental yields for houses are well below 5 per cent in all our capital cities, except Darwin. In Sydney and Melbourne, they’re below 3 per cent, while Canberra and Adelaide are under 4 per cent.
At current mortgage rates that means cashflow-negative properties.
The ideal investment for many has become an affordable property with rental yields above 5 per cent - and preferably higher than 6 per cent - in a location with the credentials for good capital growth.
One of the myths that abounds in real estate is that you can have a strong rental return, or you can have strong capital growth, but you cannot have both in one investment. In reality, you have the best of both worlds if you choose your location wisely.
Regional centres with high capital growth, rental yields
Our analysis shows it’s the regions throughout Australia with the big infrastructure spend and job opportunities that are delivering the strongest yields.
In New South Wales, that would be Moree with a median house price of just $310,000, offers a rental yield of 7.2 per cent and has recorded median house price growth of 17 per cent in the past 12 months.
The suburb sits within the Moree Plains LGA, which is set for strong growth in both its population and economy as it has been designated as a Special Activation Precinct by the NSW State Government. It also benefits hugely from the $31 billion Inland Rail Link.
In Queensland, central Mackay units are the strongest performer with a rental yield of 8.1 per cent- and 12-month price growth of 9 per cent. Mackay’s property market is being buoyed by improvements in its local economy.
It is an interesting example also of the growing trend of owner occupiers and investors choosing apartments over houses, as they are more affordable and are offering stronger returns.
Another excellent performer in regional Queensland is Dalby, the main regional centre for the Western Downs region west of Toowoomba. Sale prices (up 15 per cent) and rents (up 24 per cent) have both grown in the past 12 months, with typical yields above 7 per cent and a median house price still in the $300,000s.
In South Australia, Port Augusta had a very strong yield of 7.6 per cent and price growth of 13 per cent for houses. Its market has really gained traction in the past 12 months, thanks to improvements in the South Australian economy which for the past two quarters has been named the best performing Australian economy by CommSec’s quarterly State of the State report.
A revival in the resources sector and advances with alternative energy projects is helping drive demand and returns in Port Augusta.
Victoria’s Red Cliffs in Mildura is that state’s best yielding option with yields of 6 per cent and median price growth of 5 per cent in the past 12 months. The strong population growth in recent years in Mildura has promoted significant development.
It has a strong agricultural sector which is attracting international investment, boosted by the completion of several solar energy projects.
In regional Western Australia it is units in Broome that are performing well, with a very high yield of 8.2 per cent and 14 per cent growth in the past 12 months.
The Shire of Broome’s population is predicted to almost double within the next 20 years, which could lead to growing demand for housing and further price and rent increases.
What these figures show is that the regional Australia property market has not run out of steam yet, it has experienced plenty of growth and for those who choose the right regional location in which to invest there is plenty of opportunity for further growth and rental yields well above what capital city markets are achieving.
