Is apartment buying in Queensland the best option heading forward?

Why Buying an Apartment in Queensland Might be the Next Investment for You?

Property investors around the world are beginning to turn to the Australian market. The nation has become home to an emerging hotspot for real estate investment partly due to Brexit, and the uncertainty that international property buyers are experiencing in the UK market.

With a significant body of private investors turning from the UK to other international markets, the added attention that the Australian market is beginning to see is bound to push property prices upward as competition grows.

Sydney and Melbourne in particular are seen as some of the top places to own investment properties. The strong annual growth seen over the last 12 months is making these cities stand out from the rest, and it’s only going to make the demand even more competitive. That’s why the two major centres in Queensland, Brisbane and the Gold Coast, are ripe for the next round of investor buying.

With a greater number of investors looking to Australian shores for their next real estate ventures, it is incumbent on prospective buyers to ensure that they are taking every measure available to them in seeking to establish a competitive edge. The backing of an experienced buyer’s agent is one such way of putting yourself ahead of the market.

That’s why the two major centres in Queensland are ripe for the next round of investor buying.

While many overseas buyers are going to be focused on Australia’s two biggest cities, the relative quiet over Queensland’s can be misleading. Let’s take a closer look at some key figures and unpack the different modes of opportunity that exist in Brisbane, the Gold Coast, and on throughout Queensland’s other hubs of activity.

According to the CoreLogic RP Data monthly indices up to the end of June, the median dwelling value in Sydney was a whopping $996,140. Melbourne wasn’t too far behind that, with $803,290, both seeing major rises over the past year (11.29 and 11.52 per cent respectively).

A closer look at the apartment market unveils Sydney as the most valuable. The median unit price in the New South Wales capital was $734,060 – an increase of 12.8 per cent through the 12 months prior. Melbourne had lower growth at just 6.14 per cent, but the value was lower too – $528,380.

By contrast, the Brisbane market seems far more restrained. The median dwelling value, including properties on the Gold Coast, was $539,770, and the apartment values were lower at $401,620. The lower median values aren’t indicative of Brisbane being a less lucrative site for property investment, however.

Savvy investors are looking to the Sunshine State for a different sort of real estate opportunity. The relatively strong rental yield that investors can expect in the Queensland market, and comparatively lower initial outlay that it would take to begin generating those yields, make Queensland properties more than worthy as an addition to a savvy investor’s portfolio.

You might ask now though, why apartments?

 

Why are apartments the best bet for investors?

 

Apartments make for excellent additions to a savvy investment portfolio. The key to their value as a real estate investment is the regularity with which they produce income. In strong rental markets with high tenancy rates, you can expect early and continual returns on investment apartment properties.

Hubs with high tenancy rates like those in Queensland and the Gold Coast, combined with the lower relative outlay in buying an apartment, give investors the opportunity to manage mortgage repayments with the assistance of rent accrued from tenants. There is of course the added benefit of capital gains, though these benefits are somewhat less pronounced in the Queensland market, as we touched on.

The most important factor here is timing. As it stands, the supply of prospective investment properties is far outstripped by the demand for affordable rental housing in Brisbane and other Queensland hubs such as the Gold Coast. And according to a CoreLogic report from July 7, the weekly rental yields around the country are currently falling, but only slightly.

Over the past 12 months, Brisbane rentals have seen a slight decline of 2 percentage points to sit at 4.3 per cent, down from 4.5 per cent. That means Brisbane has the third highest rental yield in the country, only behind Hobart and Darwin, but far ahead of Sydney and Melbourne (3.1 and 3 per cent respectively).

Brisbane has a weekly rental average of $432 – that’s far behind Sydney’s $596. However, the relative affordability of renting in Brisbane contributes to a comparatively greater likelihood of uninterrupted tenancies or only brief transitional periods between tenancies. Many Australians don’t want to be forking out close to $600 per week on rent alone, so offering a cheaper alternative might well set you up in the long run for greater returns.

 

Queensland is Still a Strong Setting for Capital Growth

 

We’ve spoken about the merit of investments in the Queensland property market, particularly apartments, being mostly tied to strong tenancy rates and the ability to generate a stable source of ongoing income. The rental market in Brisbane and the Gold Coast remains a significant buyer draw. But the promise of strong capital gains remains an important mark in the right column for prospective buyers in the Sunshine State.

“Capital growth, which has slowed from its peak, will continue to be a much more important factor for property investors than rental returns,” said CoreLogic Research Analyst Cameron Kusher.

Enormous falls in Darwin (16.2 per cent) and Perth (8.6 per cent) have dropped the rest of the country 0.4 per cent in total, but that figure is far more encouraging without the major changes to the west included. The eastern seaboard has long been seen as the best place for property buying anyway, and rental yields falling or not, that is still the case.

The potential for capital gains is what gets most investors into the market. The CoreLogic Pain and Gain report from March 2016 shows the percentage of homes that sold in the first quarter of 2016 for a profit, and those that sold for a loss.

In Brisbane, the unit market had only 14.1 per cent in the ‘pain’ category, with the regional sector around the entire state showing 23.8 per cent. It might seem high, but it’s the third-best number, behind only Sydney and Melbourne. To show the strength more clearly, regional Western Australia had an enormous 43 per cent of units sell for a loss, while the regional national average was only 19.1 per cent.

Clearly, Queensland represents great quality buying compared to the rest of the country, especially for investors who don’t want to fall into the trap of losing money when it comes time to sell.

 

Brisbane & The Gold Coast – Whereabouts should investors be looking?

 

As stated in the Smart Property Investment (SPI) Fast 50 report from 2015, 13 of the suburbs chosen as the fastest growing in Australia were in Queensland. Only New South Wales had a higher figure with 21.

Among these were Logan Central, Caboolture South, and New Farm in Brisbane, as well as Broadbeach on the Gold Coast.

In particular, Logan Central won’t cost an arm and a leg, and SPI reports that it has a rental yield of 6.2 per cent – far above the city-wide average.

New Farm, lying close to the Brisbane CBD, has a median unit value of $567,000 according to Residex data – a significant jump on the unit price of the whole city. There are over 6,000 units in this suburb, meaning there will be plenty of great opportunities for investors.

Depending on the amount you’re wanting to spend, Refinery Parade has the highest median unit value in the suburb with an impressive figure of $1,337,260. At the other end of the spectrum is Bailey Street, which goes as low as $341,318.

Being in such close proximity to the city centre makes New Farm great for investors, especially with the amount of demand. The median weekly rent amount is $490. You’ll be seeing solid returns in no time at all.

Further to the south is the Gold Coast hub of Surfers Paradise. A unit there will cost you even less, with the median value below $400,000. There are also a staggering 26,811 units in the suburb, so you won’t be starved for choice. The most expensive street in Surfers Paradise is Northcliffe Terrace at over $1.3 million, and the cheapest is closer to $200,000 on Barranbali Street. Potentially the greatest thing about investing in apartments on the Gold Coast is the weekly rent. For a much lower purchase price, you’ll have an average weekly income of $440!

 

Get in touch with Cohen Handler

 

There’s a lot to love about investing in units and apartments in Queensland. Finding the right one can be tough in this competitive market, though, which makes employing a buyer’s agent from Cohen Handler even more important.

Give yourself the best chance of making sound capital gains, great weekly income from rent and not having to pay through the nose for an apartment and make your move on the Queensland apartment market today. Get in contact with the team at Cohen Handler to learn more.

up icon