Brisbane Investments on Top

February 13 2012 | Australia

Brisbane’s apartment market trumps other capital cities for the best investment returns, according to new PRDnationwide research.

When comparing one, two and three bedroom units in Melbourne, Brisbane and Sydney – the Queensland capital outperformed.

Robert Matta, PRDnationwide analyst, said the research showed the gross rental yields investors achieved on average during the September quarter 2011.

The most impressive yields were for a 1-bedroom Brisbane unit at 6.4 per cent.

“The evidence suggests Brisbane offers a superior value proposition to that of Sydney and Melbourne, with attractive yields and more affordably priced product on the market enabling a greater pool of investors with varying financial capacities to become active in the property market,” said the researcher.

Sydney has taken second place over Melbourne - having outperformed in the one bedroom market, and performing on par in the two bedroom market.

“It has been widely publicised that Brisbane, when compared to other capital cities experienced one of the greatest decreases in property values since 2010, which has to an extent contributed to Brisbane having recorded the lowest median price in the September quarter, 2011, compared to Melbourne and Sydney,” said Mr Matta.

He continued: “Low sales activity and tight vacancy rates for units have underpinned relatively strong rental prices in the current market. Both factors have influenced the current yields that are being achieved by investors active in the Brisbane unit market.”

Mr Matta said prospects for rental growth across each capital city was looking very promising, as a strong level of demand for city accommodation and low vacancy combine to underpin increasing rents in the current market.

With that said, he believes that  with recent reductions/ stabilisation in mortgage rates, government incentives, softened property values, favourable buying conditions and a considerable amount of new supply targeting more affordable price points, many city dwellers are beginning to justify a possible leap into the property market.

“We might begin to see rental demand for units within the sub $500,000 price range (the price range this segment of the market is likely to transact in) dilute as a consequence of this shift, which will effectively pull back rental growth” he said.

“Whilst current market fundamentals present several sound opportunities for renters to perhaps enter the property market, savvy investors are even more so looking to capitalise on the very same opportunities,” he said.

“Investors who are concerned about property growth in the long term rather than cash flow are perhaps those who are currently proactive in the market today.”

“Identifying distressed developer stock, mortgagee sales or simply well priced units isn’t too hard to come by in the current market,” he said.

He said purchasing property under these circumstances, in areas (capital cities) that are guaranteed to appreciate in value over time, presents the greatest opportunity for capital growth.