Strong population growth in Tamworth City, low vacancy rates and restricted supply of accommodation will ensure rent prices continue to grow over the next few years, according to PRDnationwide research.
PRDnationwide Research Analyst, Oded Reuveni-Etzioni, said house activity stabilised over the past 18 months, with 425 houses transacting in the August 2012 half year period.
"This level, while short of the August 2009 peak, represents a balanced market. Enquiries from upgraders and investors have increased in September and October even though first home buyers interest declined following the cessation of the $7000 First Home Owner Grant."
According to Mr Reuveni-Etzioni, stock priced under $300,000 was in demand over the six months to August 2012, with houses in this bracket accounting for 64 per cent of transactions, compared to 54 per cent of transactions for the same period in 2011.
"Demand for properties toward to bottom end of the market originated from first home buyers and investors. While first-time buyers' activity has eased, investors are still active, looking for solid yields in the six to seven per cent range."
He said the median rent for a three-bedroom house, the most common form of accommodation in the region, increased by 14 per cent in the three years to September 2012, highlighting a shortage in supply of medium-density accommodation, amid a growing demand.
"While yields for units normally exceed house yields, a lower yield in Tamworth's case was the result of an increase in the median unit price," he said.
"The August median unit price of $199,500 represented a 12 months growth of 5.3 per cent, which eroded the yields for some properties but otherwise provided a positive return to investors in the form of capital growth."