Southernmost properties now the apple of investor’s eye

Hobart has seen the most rental yield growth over the past five years, significantly outpacing Sydney and Melbourne.

TK Ahipene and partner Laura Donnelly with their daughter Isla at the investment property they recently purchased in the Hobart suburb of Glenorchy. Picture: Peter Mathew

Property investors, long missing from the market, have become more active as prices bottom.

And for investors, it is Australia’s southernmost capital, Hobart, that has experienced the most growth over the past five years, signif­icantly outpacing Sydney and Melbourne.

Data compiled by property researcher CoreLogic for The Australian has shown rental yields in much of the state have climbed above 10 per cent since 2014.

Top-ranking Hobart is up 12.2 per cent with a gross yield of 5.2 per cent, followed by southeast Tasmania (up 11.8 per cent) and Launceston (up 10.7 per cent)

The rest of the list is dominated by regional Victoria and NSW, representing 13 of the top 20 highest growth regions for yields.

CoreLogic’s head of Australian research, Tim Lawless, said Tasmania’s “disproportionate representation” at the top of the list reflected strong capital gains plus notoriously tight rental conditions that had kept yields high.

“Over the past five years, Tasmania has dominated the capital growth stakes. Also, quite rarely, Hobart and regional Tasmania has maintained a very high yield,” he said. “Normally when you see capital growth this strong, there is yield erosion, yield compression. But this time rental markets have been very tight across Tasmania, which has been seeing rents rising just as much as property value. In the last couple of years, rents have outpaced property values.”

Investor loans recorded their strongest growth in more than three years in August, up 5.7 per cent (excluding refinancing), according to the Australian Bureau of Statistics. While significantly below the long-term average, the data shows investors are beginning to soak up some of the confidence in the rest of the market.

Melbourne’s Mornington Peninsula, Geelong and west were the only greater metro markets to make the top 10. The city’s more affordable markets have benefited from strong demand for housing supported by greater participation from first-home buyers.

Looking to 2020, SQM Research managing director Louis Christopher said growth cities Brisbane and Perth would be the ones for investors. The combined factors of falling vacancy rates, a recovering mining sector and improved migration and employment figures would make both markets “bullish”. “Due to the mining downturn, there has been this extended ­ period of under-building in Perth because there was no demand for investment stock. With the recovery in mining, we’re seeing a recovery in employment and we are seeing a pick-up in the population growth rate once again,” he said. “During the height of the mining boom in 2012, rental vacancy rates were 0.6 per cent. My bet is we’re going to get back to those levels again in time.”

In August, investor Tekaniwha “TK” Ahipene, 25, was considering an investment property in a West Australian mining town or one in his home town of Hobart. He decided to buy in the north Hobart suburb of Glenorchy. “People need rentals, and there isn’t many around. I suppose now would be an opportune time as an investor to pick one up,” he said.