The June issue of Australian Property Investor magazine is out now and the cover story features Australia’s hottest rental suburbs. OnTheHouse.com.au has actually run the numbers, and they’ve come up with the best opportunities around Australia. It appears there are almost 300 suburbs offering potential. In today’s show we talk with Eliza Owen from OnTheHouse.com.au.
Kevin: The June issue of Australian Property Investor magazine is out now, and the cover story features Australia’s hottest rental suburbs. In his opening paragraph, Kieran Clair makes the point that smart investors understand serviceability of a loan could be the difference between securing the bank’s favor and getting a knock back.
OnTheHouse.com.au has actually run the numbers, and they’ve come up with the best opportunities around Australia. It appears there are almost 300 suburbs offering potential.
Eliza Owen from OnTheHouse.com.au joins me. Eliza, thank you so much for your time.
Eliza: Thank you for having me.
Kevin: Armed with the kind of results that are in this report – and it’s actually very, very comprehensive – how best can an investor use the data?
Eliza: What you have there is some one-shot data that displays the rental yields and median values for these suburbs. You can use those rental yields to understand affordability of a property purchase, and you’re using it to understand how much of a mortgage a tenant can help you to pay off.
It’s also a really good indication of the returns that are available from the property, as opposed to other types of investments. It really depends on the individual investor’s strategy, and they can use that data to aid them. Then the median values are important for knowing what areas you can typically afford to invest in, as well.
Kevin: In broad terms, though, what were the results when you looked at say cap cities compared to the regions?
Eliza: We found that in that list of suburbs, you’ll find that the amount of regional areas are somewhat less. But when you rank them in terms of their capital-growth performance and their rental-yield performance, you’ll find that regional areas tend to be concentrated at the top of that list. Regional areas perform particularly well in terms of rental yield because of their level of affordability.
Kevin: You mentioned affordability, Eliza. Just picking up on that for a moment, what were the other benchmarks that you used to determine whether an area is hot?
Eliza: You have to look at a combination of the numbers and also some qualitative data, so that you can gauge the story behind the numbers. We mentioned before historical performance. We want to look at long-term performance strength in terms of capital growth and watch out for volatility.
Another interesting one is population growth, to confirm that there’s a consistent demand in the area. Population growth is a proxy for things like employment, good facilities in an area, good access to transport.
The level of development and density: if an area has high density and is still in high demand, then you can probably expect good rental returns for a while, whereas if big developments go in, renters have more options and the opportunity to pay less.
Kevin: Just in closing, what would you class as an outstanding gross return, and how many areas actually met that criteria?
Eliza: A fairly good growth return in the current market, when you consider both capital growth and rental yield, is 8% for 2015.
Kevin: There you go. That great report is out now. It’s in the Australian Property Investor magazine, the current issue that’s out, presented by On The House.
This interview is just a small portion of the extended interview I did with Eliza. You can see that now on the Real Estate Talk website in the Australian Property Investor feature channel, and it was also an interview that was sent out by API in their latest newsletter.
But in the meantime, Eliza, thank you so much for your time.
Eliza: Thanks for having me, Kevin.