According to recent data modelling, Victorian rental yields are higher in the CBD while some regional hotspots return surprisingly high returns.
Data from the Real Estate Institute of Victoria (REIV) found one-bedroom apartments has the highest rental yield in the state, hitting a median price of $347,500.
Following the metro area, three-bedroom houses in regional suburbs have the highest return.
REIV president Robyn Waters said: “The REIV’s analysis shows that Melbourne’s one-bedroom unit market is the most profitable for investors.”
“Considering that you only need to outlay $347,500 to buy a one-bedroom apartment in the city, it is a great market for people to dip their toe into property investment and be confident of a tidy return of around $450 a week.”
Ms Waters said the “surprise result” from the report was in the prevalence of regional Victorian towns in the high rental yield list. Three-bedroom houses in Moe generated a 6.6 per cent return and three-bedrooms in Stanwell returned 6.4 per cent.
One-bedroom homes in Stanwell hit over the 6 per cent mark, as did three-bedroom homes in Melbourne’s metro with 6.2 per cent returns, Shepparton with 6.2 per cent returns and Wodonga with a 6 per cent return rate.
Ms Waters said the results for inner-city areas, such as Melbourne, Southbank, South Yarra and Docklands, “are largely due to their appeal to CBD workers, higher education students and their families as well as retirees.” She also credits the value of proximity, the attraction to the CBD’s convenience and public transport.
Ms Waters added the strong performance of regional towns is likely a product of rental vacancy rates: “Demand for rental properties is at a [record] high and there is simply not enough stock in the market to meet demand in many areas.”
She said for example, the rental vacancy rate for the Latrobe Valley, South and West Gippsland, is sitting at 1.3 per cent, “which could go some way to explaining high rental yields for many towns in the area in our analysis.”
“Given recent interest rate cuts, APRA guidance to loosen lending standards and the results of the federal election which has delivered stability, the REIV is starting to see an upturn in investor activity which is likely to continue as we approach the spring selling season,” Ms Waters said.