Where to invest about 500k in Australia for CG & yield?

The major regional cities like Ballarat are on the rise and have well diversified economies. I’m not talking about two horse towns out in the bush.

We are at the cusp of a fundamental shift happening in Australia with labor and capital spilling out of the capital cities into major regional centres as super centralised state based economies (like the one that Victoria has had to date) are no longer sustainable.

In terms of bushfires - none at all around Ballarat, not sure about other regions and states. Drought etc - you are talking about rural, not regional cities. Not applicable.

1 bedders and capital growth, under 0.1% of the existing 1br stock has potential for good growth, think boutique developments on the best street in a prime post code / building. But they won’t be $500k to start with. Examples in VIC - 150 Clarendon St in East Melb, The Melbournian, QT Melbourne, 35 Spring. The last 1 bedder at the QT sold for over $1m two years ago and there hasn’t been a sale since. 150 Clarendon has one going for $2.7m at the moment. These are the exception rather than the rule and I would categorically stay away from 1 bedders if growth is the objective.

 

You're living in the past dude!

The previous oversupply issues will fade at some point, prices will play catch-up to other sectors, and one bedders offer the best yields - in right circumstances

 

I have mentioned several times in previous posts that Bendigo is an up and coming city to invest in. From the look of it, this is happening, esp the last 6 months.

The window to buying "cheap" properties is closing rapidly. Value for money houses here are now selling in matter of days, not weeks. The number of Buyers agents representing Melbourne or interstate investors has increased. This is something never seen or heard before. Such a development is very telling of the future market movement of this city.

Compared to Ballarat, Bendigo is still cheaper. Historically, Bendigo's average house prices across all suburbs is 10% higher than that in Ballarat. The opposite happens now - due in large part to the great growth of Ballarat house prices the last 1.5 years. Whilst we cannot expect Bendigo house prices to out perform Ballarat again, we can safely say that this is a sign that there is still great value in Bendigo properties.

Yes, Bendigo is further from Melbourne as compared to Ballarat. But this is not necessarily a bad thing. As we can clearly see, Bendigo is now reigning like the capital of Central Victoria - with residents within 100km in radius (or more) coming over to do their weekend shopping and have their needs served. Coupled with the government's push to have migrants and locals live in Regional Vic, I believe Bendigo is poised to grow further, possibly faster than Ballarat in the long run.

In short, I feel that Bendigo is a city you can buy in if you're after both yield and capital growth. Harder and slightly costlier to buy such properties now but still possible if you search hard and act fast.

 

Does the QT work on the business model they just run the hotel but do not own the brick and mortar?
So the property is leased to the QT?

 

Hey no if that was the case the apartments would only be worth a third of what they are
There is 24 completely separate / vacant apartments, separate lift, separate OC on the top two floors of the hotel. Just like the ones at The Westin on Collins / Swanston.
I think the QT Bondi is actually serviced apartments which I something I would generally avoid. The Melbourne ones are normal strata residences.

 

Sure a 1 bedder may offer a decent gross yield, 6-7% but often dive deeper and add all costs, albeit onto a typically lower rent and your left with peanuts. All this at the risk of your IP not achieving any capital growth. its not just about oversupply, you have a VERY limited market with studio's/1 bedders, very little demand hence prices stay low.

I understand 1 beds in Bondi or Coogee, but advising Perth or Brisbane when land struggles to grow let alone a 50sqm unit is madness at the OP's stage in life. Growth was also one of the considerations in the OP

Given the budget I understand a lot of houses are out of the mix but at least consider a 2 bed, well located unit in a small complex, you should still be able to achieve 5% yield, low BC and have potential for growth. Or go the ETF/LIC route

 

Thanks Doublebrick. I have received an email from a buyer's agent regarding a block of units in Newtown Sydney with units selling in the 500k range before costs, So about $540k to get the keys. One bedroom with carspace. Rent about $450 per week. Close walk to train. It's about 25 minutes to the city centre. Old brick block about 44 years old. Still trying to get details of building - if any major issues.
But it is something like this, as you say, something that is low risk and low maintenance that will tick up in capital growth to cover me if I need to sell down and a decent rental return.

Queensland is the issue for me here as by already owning a free standing house in Brisbane, my threshold for the Land Tax is currently $90,000 below that mark. Adding a property there does expose me closer to that liability and hence erode income potential.

 

That sounds like a decent yield if you can get it for that price in Newtown and the strata isn’t too high - if it’s a low rise walk up it shouldn’t be. Last year there was an oversupply of inner city rentals due to the new apartments but it may have improved now. Check the rentals online to see how much stock and what rental prices for comparable buildings to get a realistic idea.