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Where to find the best rental yields in the country?

CoreLogic’s July 2019 – Top Rental Performers Report, ranked suburbs around the country which are achieving the highest rental yields. For some investors, the yield performance of a property is critically to it fitting in within their strategy.

The Top 100 suburbs are revealed below.

Queensland dominates the list with many of the top performers scattered around the state. A large portion of them being small towns outside of Brisbane, Gold Coast and Far North Queensland, in particular mining towns. For many of these suburbs, they don’t benefit from being within a capital city. Most are reliant on sole industry economies which make them far more volatile. The recent mining downturn has seen values fall significantly in these towns and despite attracting a high yield on current values, many were purchased for substantially more.

Take Moranbah (ranked 9th) a mining town in Queensland for example. In 2012, it’s median house price was recorded at $750,000, it now sits at $200,000. Achievable rents have also fallen dramatically however the low purchase price means, yields remain quite high. In this instance, investors targeting a high rental return in 2012 have seen significant price falls negatively impact their overall investment strategy.

For some investors, yields prove to be quite influential in their decision as this is the more immediate return on investment. In some cases, this can be a successful approach when you’re able to identify a high yielding asset that also offer strong potential for capital appreciation. However, a yield driven strategy can often lead us to single industry towns where market volatility risk is much higher.

So, should you be targeting the suburbs on this list where some of them are achieving yields of up to 11%?

There’s no right or wrong way to invest, it’s dependant on the type of strategy has been adopted. Historically, investors who have built the best performing portfolios are those who haven’t sacrificed potential capital growth for a strong rental yield and vice versa.

While being important, in our view, the properties yield is important to enable an investor to hold onto the property for the long term at minimal cost. The benefit of the long holding period will allow them to achieve strong capital appreciation which outweighs the financial benefit of a high yield.

To identify the suburbs like these, research is critical. Understanding the following:

  • Market cycles
  • Population growth
  • Economic drivers
  • Supply and demand
  • Demographic profile
  • Livability

The process then involves identifying the right properties within that location through understanding quality and value.