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Apartment yields... Syd - Melb - Bris.

Discussion in 'Where to Buy' started by Richard Williams, 30th Sep, 2015.

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  1. Richard Williams

    Richard Williams Buyers Agent - Southeast QLD Business Member

    Joined:
    9th Aug, 2015
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    Location:
    Loganholme, Brisbane
    Rental yields tell the story: one bedroom apartments are hovering at 5.1 per cent in Sydney but 6.5 per cent in Melbourne and 7.2 per cent in Brisbane. Yields for two-bedders are even tighter: 4.7 per cent in Sydney, 5.5 per cent in Melbourne and only 5.9 per cent in Brisbane.

    7.2% in Brisbane for a one bed unit? Anyone getting this on a recent purchase?

    Read more: http://www.smh.com.au/business/prop...hits-peaks-20150929-gjx87h.html#ixzz3nATEAOHK
     
  2. JDP1

    JDP1 Well-Known Member

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    20th Jun, 2015
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    Location:
    Brisbane
    true- Brisbane has had higher yields for most if not all property types in large cap city markets- houses, TH's included, like for like comparison.
    I have a few concerns with one bedders in Brisbane, despite their high yields:
    1. There are massive amounts of supply being built and planned. There is a real risk this supply will outpace demand , leading to only one result. Brisbane pop is growing, but not as much as the growth [percentage wise] in new unit construction [ there should be stats for this somewhere..].
    2. The article mentions there is a fair amount of land in Melbourne, but so too in Brisbane. This will see a steady supply as needed- developers wont have an issue buying cheaper land in Brisbane and building tons of one bedders.

    The one bedder market will have the highest CG in Sydney as land is truly in shorter supply , which has happened, happening now, and continue to happen in the future. The pop growth of Sydney will greatly help that as well.

    Overall, I just think that there are better plays with some land/scarcity in Brisbane rather than [a higher risk of being oversupplied ] one bed unit market...however, it all depends on what you are looking for- it still does offer the highest yields.
     
  3. CosmicTrevor

    CosmicTrevor Well-Known Member

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    18th Jun, 2015
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    Location:
    Sydney
    I read the article and I can't make sense of the numbers. To be achieving 7.2% on what is an acceptable weekly rent in Brisbane (non-NRAS, unfurnished, car park included, CBD or near CBD) - lets say $300-$450. Using the 50 week rule this is $15,000-$22,500 per annum gross revenue. A yield of 7.2% means the capital value of ~$208,000 for $300/week and $312,500 for $450/week.

    Based on the analysis I do on a regular basis I see weekly rents of $400-$450 for brand new 1B apartments in Southbank, West End, New Farm, Newstead, Fortitude Valley and similar. These apartments do not sell for $312,500. Older apartments would sell for high 200's to mid 300's but clearly the rent achievable for these will be lower than for newer apartments if all else is equal.

    So in short I don't believe the numbers unless they are referring to serviced apartments.

    My view is;
    1B/1C - near CBD, new or near new, furnished - yields of 5.5-6.5% are typical
    Unfurnished, 5.0-5.5% are typical

    Higher would be achievable for an older desirable apartment with some sort of unique quality, but the typical weekly rent for a new apartment is going to set a ceiling for older apartments. Thus I'm not convinced that 1B rental yields are "hovering at 7.2%", I would see that as a peak level.

    My 2c worth
    Trev
     
  4. Richard Williams

    Richard Williams Buyers Agent - Southeast QLD Business Member

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    Location:
    Loganholme, Brisbane
    I agree 100%, that's why I asked if anyone here is getting those yields in Bris on a recent purchase.
     
  5. Redwood

    Redwood Well-Known Member

    Joined:
    22nd Jun, 2015
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    342
    Location:
    Melbourne
    Those yields are outrageous and not accurate. Units in Brisbane can achieve 5.5% Sydney lucky to get 5% and 4.5-5% in Melbourne is achievable.

    Cheers Ivan