month in review · this publication presents a generalised overview regarding the state of...

Month in ReviewAugust 2020The Month in Review identifies the latest movements and trends for property markets across Australia.

Contents

DisclaimerThis publication presents a generalised overview regarding the state of Australian property markets using property market risk-ranking scales. It is not a guide to individual property assessments and should not be relied upon. Herron Todd White accepts no responsibility for any reliance placed on the commentary and generalised information. Contact Herron Todd White to obtain formal, specific property advice on any matters of interest arising from this publication. All rights reserved. This report can not be reproduced or distributed without written permission of Herron Todd White.

Feature – The property investor’s playbook 4

Commercial - Industrial 5

Accommodation and hospitality Spotlight 7

New South Wales 9

Victoria 11

Queensland 12

South Australia 17

Western Australia 19

Northern Territory 20

Australian Capital Territory 21

Residential 22

New South Wales 25

Victoria 35

Queensland 39

South Australia 47

Western Australia 51

Northern Territory 56

Australian Capital Territory 58

Tasmania 59

Rural 60

Month in ReviewAugust 2020

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We’re now into month eight of this very testing year and as we adopt national and states-based strategies to tackle infections, our economy continues to operate in a push-pull fashion.

As at the time of writing, metropolitan Victoria was under a stage 4 lockdown, NSW is on the verge of implementing stricter measures and Queensland closed its border to the southern states. While circumstances can feel overwhelming, these are also the moments when our nation’s mettle comes to the fore. Resilience in the face of challenge is a hallmark of our industry too.

With the shutdown likely to extend for some weeks in Victoria, Herron Todd White stands ready to offer support. Property valuation has been deemed an essential service in the state given its crucial role in the finance sector. We are grateful our business can continue to operate, that our people are safe, and that we have practices and procedures to ensure neither the quality of our advice nor the health of the public are compromised.

It’s during these testing times the steadying guidance of experienced professionals is invaluable.

One approach to help us all endure is to focus on the future. By making important decisions founded on long-term expectations, we can choose options today that will pay dividends over two or three market cycles.

As such, we thought it time to study residential markets from an investor’s perspective. Our residential teams around Australia have revealed the state of affairs for investor purchasers in their

There are important insights here, including:

• Well-located industrial property is the best long-term prospect in Sydney, while regional markets continue to be resilient,

• Online shopping and warehousing are supporting Melbourne industrial investment,

• Southeast Queensland industrial investment prices remain steadfast,

• Investment across smaller capitals and regionals has softened.

We’ve also included a ‘Commercial Spotlight’ addressing the state of the accommodation and hospitality property market from the beginning of the COVID crisis through to an outlook of what’s lies beyond the shutdowns. This study includes valuable insights from Australia’s most respected hospitality and leisure industry expert, our very own Jim Macey.

Finally, our rural valuers present a market update with particular attention paid to foreign investment in their sector.

Please enjoy this month’s issue of Month In Review.

Gary Brinkworth CEO

speciality locations. This is an investor’s playbook that can provide some much-needed perspective.

Some of the key findings by residential teams this month include:

• Affordable housing and granny-flat construction in Western Sydney looks promising,

• Town planning changes in Kyogle and surrounds are opening up small development opportunities,

• Many regional property markets remain resilient due to low/nil infection numbers,

• CBD accessible lifestyle regions are gaining appeal,

• Multi-residential investments (e.g. flats) hold excellent promise across many markets,

• Queensland property positions itself as an appealing post-pandemic alternative for southern investor,

• New construction is gaining momentum in some centres on the back of government stimulus,

• In Perth, transaction numbers rise, and vacancy rates fall due to low infections.

Continuing the theme, our commercial specialists look at investment in the nation’s industrial markets. This is a price-accessible sector of commercial real estate, so even small-scale investors will learn some valuable lessons from this issue.

A message from our CEO


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Well, perhaps not those ‘go it alone’ folk who’ll do whatever it takes to ignore well intentioned advice. You know the sort. They purchase a new IKEA wardrobe for the kid’s bedroom and refuse to follow the step-by-steps laid out in the flat-pack guide.

How hard could it be?

Several hours later, they’ve invented new ways to swear and decided the youngsters can make do with a second-hand cupboard from Nana’s house.

While I applaud the gumption of these industrious pioneers of DIY furniture assembly, it really does pay dividends to make time and read a document prepared by experts in their field.

One area where taking on professional advice is essential is around property investment. This is not a realm where most players have the innate ability to just make it up as they go along, because when it comes to your future financial security, making a dud move in real estate can be extremely costly.

There are complex issues and big figures at play. Investors rely on finding their balance between cash flow and capital gains while ensuring there’s liquidity for the pivots, and funds to service loans.

toward what’s happening under FIRB guidelines. A timelier take on the rural sector you will not find.

There it is – laid out in plain English and ready for you to study. But don’t just rely on this excellent frieze of Australian property investment. Be sure to contact your local Herron Todd White team so they can guide you through the real estate confusion and onto fiscal wellbeing.

With one eye on the current crisis and another looking to the far horizon, our valuation doyens provide their specialist opinions on how investors are operating in their service areas.

And all of this should to be tackled with the emotional detachment of a house brick.

It’s here where experts flourish. We’ve asked our team to provide the essential property investor’s playbook for Aussie markets as at right now. With one eye on the current crisis and another looking to the far horizon, our valuation doyens provide their specialist opinions on how investors are operating in their service areas.

Moving onto commercial, we’ve got two excellent sections for your enjoyment this month.

The first is a commercial spotlight feature where we discuss the accommodation and hospitality sector pre, during and post the COVID crisis. We have an enviable cohort of this nation’s most experienced experts in the sector ready to dissect the market and deliver unparalleled advice.

The second commercial text is our main theme this month where – location-by-location – our talented valuers concentrate on what industrial investors are up to. It reveals where and what they’re buying with a view to building a portfolio and enjoying the benefits?

Finally, our rural teams come to the fore once more. It’s a market wrap with recent sales and a bent

Who doesn’t like a little guidance now again?

The property investor’s playbook

IndustrialAugust 2020

Liability limited by a scheme approved under Professional Standards Legislation.

This report is not intended to be comprehensive or render advice and neither Herron Todd White nor any persons involved in the preparation of this report accept any form of liability for its contents.

Entries coloured purple indicate positional change from last month.

National Property Clock: Industrial

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RISING MARKET

Start of Recovery

BOTTOM OF MARKET

DECLINING MARKET

Approaching Bottom of Market

PEAK OF MARKET

Approaching Peak of Market

Starting to Decline

Alice SpringsBallina/Byron BayBrisbaneGeelong

Gold CoastIpswichLismore

NewcastleOrange

SydneyToowoomba

C’berra/ Q’beyanCentral CoastCoffs Harbour

IllawrraMelbourne

Southern HighlandsSouthern Tableands

Sunshine Coast

BundabergDarwinHervey Bay

PerthTownsville

EchucaHobartMackay

AdelaideCairns

Gladstone

HorshamMildura

RockhamptonSouth West WA


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The impacts of the Covid-19 pandemic have been felt across the world and in Australia, particularly Victoria, which is battling to get the virus under control. As a result, the accommodation industry in Australia is facing unprecedented challenges as the country has restricted both inbound international tourism but also introduced domestic movement restrictions in an attempt to get the virus under control. Such strict controls have never been enforced in Australia before.

With Hospitality Valuer’s located in offices across the country Herron Todd White has taken this opportunity to shed some light on what we are seeing in regard to where the sector was positioned prior to the pandemic, where it is currently and what the future may hold.

PastOver recent years prior to the Covid-19 pandemic, the hospitality sector saw an increased number of transactions and confidence within the market place. This was aided by the low interest rate environment with many operators / investors reluctant to sell as it was becoming increasingly difficult to replace the strong yields offered by the sector.

Occupancy levels across the country were generally considered strong however, some capital city markets had seen a large increase in supply which

had put a slight downward pressure on occupancy levels and room rates as the market took time to absorb this new supply.

CurrentUnfortunately the accommodation sector has declined significantly since March 2020 as the Federal Government introduced the closure of the international border and State Government’s across the country introduced various forms of domestic border closures and social distancing measures in order to curtail the virus’s impact within the country.

Since this time the majority of accommodation facilities have struggled with some facilities temporarily closing whilst others are reporting occupancies below 20%. STR Global data released for the month of June 2020 shows that across Australia average occupancy rates have fallen to below 35% which represents between a 37% to 73% reduction in occupancy levels compared to June 2019. The average daily rate is also showing a reduction of between 9% and 40% whilst

RevPAR is showing a reduction of between 43% and 76%. This highlights the significance that the Covid-19 pandemic is currently having on the accommodation industry.

Accommodation and hospitality Spotlight

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Yarra Valley Motel, Lilydale. Freehold Going Concern Sold in Mid 2019. Source: HTW

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or the impact that the shift in the way we currently work from home will have on corporate travel in the future.

Continued Government support, such as the Job Keeper scheme, will be vital for all hospitality markets across Australia until the current restrictions are eased.

In terms of market value it is currently unclear what movement will occur in the various sectors and regions across Australia. Values within the hospitality sector are traditionally cash flow driven and based on a stabilised level of trade which is generally unable to be achieved in the current environment. As such, market values within the sector will be highly dependent on the ability of the various sectors across Australia being able to return to previously achieved stabilised level of trade. Other significant factors in the market value attributable to such assets is how long these going concerns will take to return to maintainable trade, will Government regulations due to Coronavirus lead to increased expenses which further impact EBITDA, or will maintainable trade differ now when compared to that which has historically been achieved.

As with any asset type, seeking out advice from an experienced professional with strong local industry knowledge is critical to risk management and our team at Herron Todd White would be more than happy to assist you.

Across the country HTW Hospitality Valuer’s are seeing very few transactions to indicate where yields and values currently fall as a result of the COVID-19 pandemic. There have been a number of transactions that have not proceeded due to the uncertainty that the current pandemic is creating and we have also seen a number of transactions renegotiated post the commencement of the pandemic in order to allow for the current uncertainty within the market place to reduce. Although, having never been in such circumstance, such negotiations are difficult indeed.

The sector has witnessed an increase in opportunistic buyers however, at present there is generally a discrepancy between vendor and purchaser’s price expectations. Furthermore, investors and operators are not inclined to test the market at the present time.

FutureAt present it appears that the recovery of the accommodation sector will look different for each state and metropolitan / regional market. The industry’s initial recovery will largely be driven by domestic tourism with international borders likely to remain closed or restricted through 2021.

Of high importance is States and Territories across Australia minimising any further impacts / waves of the virus and therefore allowing movement and social distancing restrictions to ease across the country. It is most likely that regional and coastal localities will experience stronger occupancy rates and improving turnover sooner than metropolitan markets as domestic tourists seek out a holiday escape away from higher risk city locations.

Metropolitan markets may remain subdued for an extended period of time as it is unknown at this stage when international borders will be opened

Despite this, occupancy rates in certain regional areas across Australia have been starting to see an increase in both current and future bookings as domestic travel returns although this confidence has been shaken in the south eastern states as the second wave of the virus has taken hold.

Operators have been dealing with the situation in varying ways. Firstly, the JobKeeper allowance has played a vital role in allowing many businesses to retain staff and has assisted in minimising the immediate impact. Banks have been extremely supportive of industry participants by providing mortgage and other financial relief packages to those impacted, including both Tenants and Landlords. Additionally, a number of facilities have attempted to adapt to the current restrictions including introducing new revenue avenues incorporating daily room rates for those who cannot work from home, take-away food and beverage offerings, pre-selling gift voucher packages, utilising the facilities as quarantine hotels and also letting out a portion of the rooms to the longer stay/residential markets in an effort to help cover costs. Some operators have taken this opportunity to carry out upgrade programs so that they will be able to gain a competitive edge once the market recovers.

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Halls Gap Motel, Halls Gap Victoria. Freehold Going Concern Sold in Feb 2020 Source: HTW


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INDUSTRIAL: New South Wales OverviewWhen it comes to critical thinking and unemotional assessment, property investors are leaders in the field.

This is especially true for those looking to acquire assets in the industrial sector. Depending on your tenant base, location and economic drivers, you may find your assets are eagerly sought after, or left on the sidelines.

This month, we set aside the owner-occupiers and look at how industrial investors are faring in markets across Australia.

SydneyThe Sydney industrial market, like most markets in Sydney, is experiencing a period of uncertainty. On one hand, demand for industrial property is somewhat stimulated by the continued increased demand for online shopping and consumer goods. On the other hand, parts of the economy are suffering which is in turn having a negative impact on demand.

The past few months have seen relatively few transactions in the market. The transactions that are occurring seem to be dominated by investors spurred by the low cost of borrowing funds and motivated by the possibility of securing an asset in a weaker market.

In terms of the future growth prospects for industrial, the overall underlying demand and supply should in the long term provide good investment opportunities. Investors who have funds available have been looking and will

continue to look for good opportunities in the market. Undeniably the main opportunities will be properties that have a secure long-term income with a strong lease covenant. Sales to date indicate that yields below 6% are still being achieved during this time of the pandemic.

For investors looking to acquire industrial property at this current time, the best prospects are likely to lie within well-established areas close to infrastructure in particular, some of the new projects such as the inter-modals and in the new growth areas such as around the Western Sydney airport. Properties with future development potential still generate some demand.

We anticipate that secondary stock will see an increase in yield, higher vacancy, increased incentives and increased letting up periods. As demand in some areas declines, property perceived to have issues or a higher risk becomes less desirable and thus we expect the capital values to decline.

In the past months, we have observed a number of investment sales which are considered to reflect the strong market sentiment during the ongoing COVID-19 pandemic.

Located approximately 40 kilometres west of the Sydney CBD in Eastern Creek, a property sold in

June 2020 for $9.8 million. The site offers easy access to the M4 Western Motorway and M7 Motorway. The property was sold by Wetherill Park Industrial Real Estate subject to a leaseback to the vendor for a five year term with a further five year option period. The advised annual net passing rental was $459,000 plus GST which reflects a net passing yield of 4.68%.

10 Roussell Rd, Eastern Creek Source: RP Data

Also sold recently was 43-47 Lincoln Street, Minto. This property sold on 7 July 2020 for $7.4 million after receiving 16 offers during the first round of marketing. The property was sold by Colliers International subject to an existing 17-year lease agreement expiring in 2030 with a further five-year option period. This reflects a WALE (by income) of 9.8 years. The advised annual net passing rental

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In terms of the future growth prospects for industrial, the overall underlying demand and supply should in the long term provide good investment opportunities.

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is $358,020 plus GST which reflects a net market yield of 4.84%. Minto is located 38 kilometres south-west of the Sydney CBD and offers easy access to the M5 and M7 Motorways (source: RP Data (Colliers International)).

Overall, there is little evidence to date that yields have softened in the industrial markets in Sydney as a result of COVID-19. The outlook nonetheless is uncertain with many factors influencing the market including a second wave, bank policy, short and longer term unemployment trends and timing of and the extent to which government stimulus is rolled back. Our broad view is that the market is unlikely to maintain pre-COVID-19 yields and growth and that the next six to 12 months will be difficult.

WollongongInvestment transactions across the broader industrial market have been limited over the last year, coming off a high base as 2018 and 2019 saw several high value sales take place to primarily local investors. Stock is limited as most owners adopt a hold approach having benefited from significant capital gain over the last five (5) years and lower vacancy rates resulting largely in a landlord’s market.

The absence of recent local sales makes it very difficult to truly gauge where yields for investment grade industrial assets in the region sit. Our Wollongong commercial valuation team are watching closely the outcome of a current listing, being the Blackwoods (Wesfarmers) tenanted strata titled warehouse and trade showroom of 2412 square metres along Five Islands Road, Unanderra currently being marketed for sale through Burgess Rawson Sydney. Hopefully by the time of our next industrial market update we can advise of the outcome of this listing and report back key investment indicators.

for Byron Bay. Local families and small self-managed superannuation funds are a typical investor buyer profile. The Lismore, Casino, and Alstonville industrial sectors have a significant base of businesses that provide services to support the surrounding agricultural industries. The agricultural industries in terms of Covid-19 appear to be less impacted than other business sectors. A small industrial multi-tenanted complex at the Goonellabah industrial subdivision is under contract for sale indicating a net yield of approximately 6.7%. The Goonellabah industrial area is flood free and caters to businesses that support the Lismore and Goonellabah urban areas and Southern Cross University.

The coastal town and industrial areas of Ballina cater to a wide base of agricultural, construction, urban, holiday and service industries. A property sold with an industrial use in early 2020 indicating a net yield of 6.4%. The Byron Bay Arts and Industrial Estate caters significantly for services to the local area and the very popular holiday destination of Byron Bay. The Byron Bay Arts and Industrial Estate has a diverse array of businesses that are more commerc and retail orientated than typical industrial subdivisions. A significant proportion of development has been strata unit development. There have been a number of recent sales of industrial zoned strata units that have sold in the range of $80,000, for a small storage unit, to $850,000. Net yields have indicated generally in the range of 4.5% to 6.3%.

The NSW North Coast industrial market appears to be relatively stable in terms of the Covid-19. The strong agricultural, home construction, and holiday base to the local economy has provided a buffer to the economic impacts associated with this.

This segment is traditionally driven by mining investment, activity surrounding the port of Port Kembla and conditions in the Sydney industrial market, so our valuers are also tracking with keen interest the general performance of these key market influencers.

Coffs HarbourThe industrial market is slightly weaker than early in the year with limited sales activity.

There is a slight oversupply of industrial bays with rental growth predominantly linked to the CPI or up to three per cent increases per annum. There are some lease incentives evident in the market. There has been minimal COVID-19 impact on the local industrial market with a limited number of tenants seeking rent relief.

The investment market is reasonable with yields of 6.25% through to 7.75% being accepted depending on tenant and lease quality. The yield for small industrial bays is lower in the range of 5.0% to 6.5% due to increased competition from the owner occupier market who are generally prepared to pay more for the property vacant possession. Generally, there is less activity and increased price sensitivity in the market.

The pending construction phase of the Pacific Highway bypass for Coffs Harbour should be a huge bonus for the industrial property market as the contract workforce will be seeking options for operation and associated local industry most likely to experience an uplift in business.

LismoreThe NSW North Coast industrial areas have a strong owner occupier presence as well as an investor presence. The investor scale is generally below $3 million in value in most locations except

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MelbourneInvesting in the industrial sector remains a viable option for overseas and on shore investors despite the COVID-19 pandemic. It’s suspected that the increase in online shopping during these unprecedented times continues to underpin the Melbourne industrial market.

With companies looking to expand their logistics network, there will be an even greater demand for warehouse and distribution facilities.

The renewed push for highly automated warehouses featuring automated guided vehicles, robotic arms and parcel pickers means these assets show even greater long-term value and growth potential. Funds that traditionally focused on retail assets have made a steady shift towards industrial assets in recent times as the retail sector continues to struggle.

Fund manager, Aliro Group, is in the process of constructing a 45,000 square metre distribution centre in Altona North and has already secured a tenant for the space once completed (online retailer, Winning Group). Furthermore, a brand new 26,000 square metre facility at 8 Felstead Drive, Truganina recently developed by Dexus Group was snapped up last year by eStore Logistics, an ecommerce fulfilment company.

Larger tenants that provide essential services to supermarkets or government will remain a solid and reliable investment during this period. With more people staying at home, there has also been a spike in demand for cold storage facilities due to people ordering home delivered, ready-made meals. A case in point is Home Delivery Service, a third-party distributor, which has recently leased 46-48 Clayton Road, Clayton North from a private investor. This is a 4830 square metre property inclusive of 807 square metres of cool rooms.

In terms of cash flow, many mum and dad investors need to be aware that smaller businesses are struggling in this current climate, with many tenants looking for rental abatements or possibly closing their doors for good. Some smaller investors are choosing to take longer settlement periods of six months in the hope that business will have returned to normal by the time the property is handed over. Banks are also in some cases offering to restructure loans, which could enable investors to hold on to assets whilst rental income is no longer flowing.

As with the sales market, it seems inevitable that the forecast overall decrease in economic activity will lead to fewer tenants seeking premises, an increase in the number of properties available for rent and, potentially, a decline in rental values.

Again, the extent of rental decline will be a function of the length and severity of the economic downturn and it is too early to make a call on future pricing at this time.

Victoria

Funds that traditionally focused on retail assets have made a steady shift towards industrial assets in recent times as the retail sector continues to struggle.

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BrisbaneWhilst the COVID-19 pandemic has certainly seen a reduction in investment sales numbers, the analysed yields for industrial investments within the Brisbane area have remained generally unaffected for prime assets with quality lease covenants. Secondary assets haven’t been so lucky with investors taking a risk averse approach to anything older in style and with vacancy or cash flow risk. As a result of the pandemic, we have seen investors become increasingly conscious of the strength of lease covenants.

The Brisbane investment market has seen a wide range of investment transactions since March, from as little as $300,000 up to the national ALDI portfolio which included a large investment asset in Brendale that transacted for circa $135 million at a yield of approximately 5%. For the more traditional price range up to $20 million, agents are reporting a substantial increase in enquiry from around mid-March and the Herron Todd White Brisbane team has been involved in a number of transactions.

The current market has created a wider disparity between prime and secondary stock as investors compensate for the increased risk profile of secondary stock. Prime investment yields have remained stable as investors are drawn to concrete tilt panel buildings in locations with good access to major motorways, ports and airports. Yields typically range from 5.5% to 7.0% for these assets depending on the length of time remaining on the lease and the quality of the tenant.

Gold CoastThe industrial market on the Gold Coast is quite segmented when it comes to buyer profile. The central, southern and far northern New South Wales region is heavily dominated by owner-occupiers, whereas the northern Gold Coast region of Yatala comprises a more balanced mix of demand from investors.

In relation to the southern Gold Coast, our sales database indicates that over the last year, only 20 per cent of recorded transactions (approximately) were to investors.

Investment properties in this area are generally tightly held and rarely offered to the market. At present, the supply of industrial property available for sale is very low and value levels are generally above previous market peak levels.

One of the most recent industrial investment sales in this region is 27 Central Drive, Burleigh Heads, which sold for $1.621 million, analysing to a net yield of approximately 6.07%. It was negotiated in early May and has since settled. The property had a Weighted Average Lease Expiry (WALE) of circa two years. The sale price and analysed yield is reflective of a continuation of the strong market sentiment at present for industrial investment properties despite the Coronavirus pandemic.

Queensland

2020 was always mooted to be the year of industrial and throughout the challenges thrown at the property industry, it is fair to say that the industrial sector has proven to be one of the more secure sectors within the Brisbane market. Furthermore, due to the significant increase in e-commerce demand in the past four months as a result of the pandemic, agents are reporting a noticeable increase in the warehousing and logistics sector of the market.

Whilst sales have a lag time to be registered with CoreLogic, the Brisbane Industrial Sales graph as at 14 July shows the significant reduction in sales volumes to date in 2020.

The current market has created a wider disparity between prime and secondary stock as investors compensate for the increased risk profile of secondary stock.

� Source:�CoreLogic�

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of good quality industrial investment holdings typically at 7% or tighter. Recent examples of this are noted as follows:

2 Enterprise Street, Kunda Park sold in February 2020 for $3.375 million, indicating a yield of 6.79%. The property has a good level of exposure and is a renovated holding with a total GLA of 2136 square metres under roof. The property was leased to the Department of Fire and Emergency Services with a lease expiry in October 2023 and two three-year leases remaining.

2 Enterprise Street, Kunda Park Source: commerialrealestate.com.au

18 Geo Hawkins Crescent, Corbould Park sold in November 2019 for $4.5 million, indicating a yield of 6.88%. The property was recently developed within the Bells Creek industrial estate to the west of Caloundra with a metal deck holding of 2,715 square metres under roof. The property sold with a seven plus five plus five-year lease back in place commencing April 2019.

87-107 Fred Chaplain Circuit, Corbould Park sold in May 2019 for $13.1 million, indicating a yield of 6.92%. The property was recently developed within the Bells Creek industrial estate to the west of Caloundra with a tilt slab holding of 7,933 square metres under roof. The property sold with

notable yield compression, particularly for buildings with a strong tenant profile and long WALE.

Examples we saw in 2019 included One Steel at Gassman Drive, Yatala, which transacted for $2.45 million. With a WALE of 3.2 years, it was reflective of an analysed yield of 6.31%. Nearby, a building on Business Street leased to Link International on a new seven plus seven year term was sold for $5.2 million, reflecting an analysed yield of 7.09%.

Despite this positive sentiment, the investment market on the northern Gold Coast has been particularly quiet over the course of 2020 as property owners have been reluctant to release capital due to a heightened risk and lack of return from alternative investment vehicles. Looking further afield, anecdotal evidence suggests the industrial market has been the most resilient to date during the COVID-19 pandemic, however we are yet to witness a suitable volume of transactional evidence to support this view.

In summary, the feedback from agents active in the industrial market across the Gold Coast (north and south) is that of positivity. Demand continues to outstrip supply and despite concerns around the broader economic environment, the small number of properties being tested on the market are achieving strong results.

Sunshine CoastThe Sunshine Coast industrial market has improved considerably over the past five years. In that time, the investment market has shown yield contractions of circa 200 points with the majority

In addition, a very recent sale at Kortum Drive, Burleigh Heads (which is under contract as at early July) reflects an analysed yield of 5.32% with a 1.2 year WALE. However, with a low site coverage of 32%, it has potential for further building development. The sale is not reflective of a typical expected analysed yield, although exhibits strong demand for a property with future upside potential.

In relation to the northern Gold Coast, the Yatala Enterprise Area comprises a dynamic mix of industrial development from small strata titled complexes to mid-sized standalone factories and ultra-modern large scale distribution centres. Accordingly, the Yatala region attracts a wide range of market participants from small local investors to large national businesses.

The market for investment properties in the region strengthened considerably from 2015 into 2017 and held firm over the course of 2018 and 2019. This demand saw a fairly active sales market and

Despite this positive sentiment, the investment market on the northern Gold Coast has been particularly quiet over the course of 2020 as property owners have been reluctant to release capital.

27 Central Drive, Burleigh Heads Source: realcommercial.com.au

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towards servicing the engineering requirements of local and regional industries. For this reason, most demand for industrial space is derived from businesses supporting the marine, tourism, sugar milling, residential construction, transport and mining services industries. Areas closer to the CBD show stronger demand.

The Cairns industrial market over the past 12 months has been strongly underpinned by the owner and part-owner-occupier market. There have been very few industrial investment sales of any note due to very limited pure investment stock with well leased properties remaining tightly held, although there is a deep pool of buyers waiting should such properties come onto the market. Yields vary from high 6% (small affordable stratas) to mid 8% for larger older properties. With the lack of any new land developed over the past ten years and the progressive run-down of supply, further industrial land will be required in the near future.

The Coronavirus to date has not had a significant impact on the industrial market. Enquiries to purchase are still strong both from owner-occupiers and investors. Enquiries to lease though have slowed.

Darling DownsDemand from investors continues to be strong with premiums achievable for assets with good tenants on long lease terms. Generally, net yields in Toowoomba have sat between 8% and 9% for fully leased properties over the past few years but there are indications that yields may have firmed recently. Generally a sub-8% yield is only achieved for properties with quality tenants on long leases.

your mum and dad local or regional investors. These investments generally exhibit shorter lease profiles (circa three years) and are entry level investments. Yields for this type of investment fall mostly in the mid 8% range. Buyers within this market are typically seeking capital growth along with good returns.

The $3 million to $5 million investor is generally your high wealth individual with properties typically having longer lease profiles and yield compression to reflect returns in the lower end of the 8% range.

The over $5 million investor is generally seeking lease security and return, along with potential tax benefits. These properties typically exhibit highly compressed yields in the sub 8% range and are large scale, modern facilities assisting in providing good tax depreciation benefits. An example of this type of investment is the sale of a large scale, purpose built cold-room distribution facility, which sold for circa $17.5 million with a 12 year lease term, reflecting a yield of 7.15%.

Overall the market has seen average yields nudging higher over the twelve months as investors extended their sights across the broader market rather than focusing as exclusively as before on properties strong on lease covenants, tenant profiles and lease periods. Those sales now taking place are mostly analysing in the 7.5% to 9.5% range but are very sensitive to their fundamentals and the yield spread remains widened.

CairnsThe industrial sector in Cairns is relatively small and its manufacturing base is largely geared

a ten plus five-plus-five year lease back in place commencing August 2018.

While the sub $1 million market and particularly the strata titled space is owner-occupier territory, we have noted sales in this space including a recent sale in Coolum of 338 square metre strata titled holding in Lomandra Place. This recently developed strata was sold for $615,000 in the past four weeks, indicating a yield of 5.96% with a five year lease in place to a local tenant.

While these sales indicate the growing demand for industrial investment holdings, the other interesting thing to note within this market is that effective rental levels have seen some improvement over the past 12- to 18-month period. This comes after a period of circa ten years of limited real growth in rentals. Typically, smaller strata spaces have seen rental levels increase to circa $130 to $160 per square metre in modern complexes, which is a circa 10 per cent increase. Larger holdings are now typically $110 to $130 per square metre, which is also a five to ten per cent increase on previous market norms.

Of course, the large unknown is the overall market fallout from the current COVID-19 pandemic. If there are widespread impacts from this, they will hit the industrial market in this location as our industrial market has historically been linked to the residential development market on the Sunshine Coast.

TownsvilleThe industrial investor market is currently subdued as buyers and sellers adopt a wait and see attitude, particularly regarding the impact on the market once businesses need to stand on their own two feet when JobKeeper terminates.

The $1 million to $3 million market is typically

The industrial investor market is currently subdued as buyers and sellers adopt a wait and see attitude.

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locations with good quality tenants on long term leases.

MackayThe Paget industrial market in Mackay remains strong due to being under the direct influence of the coal mining industry which has remained largely unaffected by the COVID-19 pandemic at this point. There have been two major industrial investment sales over recent months:

◗ 23 Michelmore Street, Paget - Sold in April 2020 for $4.47 million to reflect a net yield of 8.39% and an unexpired lease term of 6.3 years.

◗ 56-58 Maggiolo Drive, Paget - Sold in March 2020 for $8.3 million to reflect a net yield of circa 8% and an unexpired lease term of five years.

56-58 Maggiolo Drive, Paget Source: sentinelpg.com.au

These properties were purchased by a property investment trust. The yields of 8.0% to 8.39% indicate consolidation on earlier market indicators. The Maggiolo Drive sale could be pointing towards a firming of yield rates for the asset class. Key drivers within this sector, as usual, are the lengthy unexpired lease terms and tenant strength associated with coal mining services.

Whilst the investor market is strong, leasing enquiry appears to be subdued at present, thus impacting vacant properties and owner-occupied properties when valued with vacant possession to meet mortgage security requirements.

Wide BayThe industrial property market throughout the Wide Bay is experiencing an extended period of low activity. Broadly speaking, the market has remained stable with little to no growth in gross rentals for some time. Of the three main localities, Bundaberg has attracted the most recent investor activity. Investors appear to have an eye for good quality tenants on long term leases, which is typically hard to come by in Wide Bay markets.

There is evidence to suggest that investors are willing to pay up to and marginally beyond $2 million for a well-placed investment property. 98 Enterprise Street, Svensson Heights sold in early 2019 for $2.05 million, which reflects an analysed yield in the vicinity of 8.5% to 9%. 63 Enterprise Street, Svensson Heights transacted in March 2020 for $1.1 million which reflects a yield closer to 8%.

There still appears to be some appetite for secondary stock with 3 Aitkenhead Street, Bundaberg East selling for $600,000 at a yield of around 9% and 3-5 Electra Street, Bundaberg Central selling for $715,000 at a yield of around 8%.

Moving forward, investor attitudes are likely to continue to favour investment stock in prominent

Major sales of note in Toowoomba over the past year include:

◗ 373 Anzac Avenue, Harristown – Sale price of $15.2 million – a modern facility with a lettable area of approximately 5,006 square metres leased to a truck dealership with an unexpired lease term of 5.84 years. Contained a balance land component. Analysed net yield of 6.42%.

◗ 55 Carrington Road, Torrington – Sale price of circa $2.67 million – a modern 826 square metre facility leased to a local agricultural machinery dealer on a new five-year lease. Passing net yield of 7.5%.

◗ 310 Anzac Avenue, Harristown – Sale price of $2 million – 1,336 square metre facility leased to a national tenant with an unexpired lease term of 5.31 years. Passing net yield of 7.5%.

Properties located in regional towns generally achieve yields of 1% to 2% softer than Toowoomba.

Major sales of note in regional areas over the past year were:

◗ 70 Dalby Cecil Plains Road, Dalby – Sale price of circa $1.83 million – 1,587 square metre facility leased to a local agricultural machinery dealer on a new five year lease. Passing net yield of 8.75%.

◗ 56 Kenilworth Street, Warwick – Sale price of $5 million – 6,370 square metre facility split into three tenancies. Majority of property leased to APN News until October 2021. WALE of 1.54 years. Passing net yield of 10.33%.

◗ 101 Raglan Street, Roma – Sale price of $850,000 – a modern 634 square metre showroom/warehouse leased to Haymans Electrical on a new five year lease. Passing net yield of 8.16%.

There still appears to be some appetite for secondary stock.

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including industrial property however will place most emphasis on WALE and tenant strength. Yields for these properties have generally been achievable in the 7% to 10% range for local tenanted property, which is an attractive option in comparison to our more southern metro markets, driving interest from non-local buyers. Yields can be somewhat lower for property with national tenants.

The coal mining industry may not however be immune to the longer term global economic impacts of the pandemic, with the price of coking coal recently falling sharply from around US$200 per tonne to around US$140 per tonne. Some employment rationalisation is reported at several Central Queensland coal mines. A continuation of lower coal prices or a further deterioration of coal prices over the next one to two years may increase the level of investment risk in this asset class.

Rockhampton & GladstoneThere is significant infrastructure spending now occurring in the Rockhampton region and this is set to continue over the next five years. As a consequence, we expect employment growth and that will have a positive impact on the industrial property sector in Rockhampton. Coal prices showed some stability at profitable levels from 2016 to late 2019 and this helped support industrial activity, however coal prices have declined and have shown greater instability over recent months. The rate of growth in industrial markets in Rockhampton is now more likely to be dependent on the timing of infrastructure projects coming to fruition.

Rental rates have remained relatively stable and there have been no notable increases, however there appears to be a steady uptake of some vacant industrial properties. We anticipate that as demand increases and supply reduces, we may start to see some growth in the rental market.

Investors are active in all central Queensland markets and will usually consider investment opportunities across a number of asset classes

We anticipate that as demand increases and supply reduces, we may start to see some growth in the rental market.

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AdelaideThe Adelaide industrial property market has been relatively quiet in recent months, particularly for investors. As mentioned in our previous industrial update, sales volumes have been lower in 2020 with various restrictions in place regarding travel and the general economic sentiment of these current times. The majority of purchasers entering the market this year will be expecting a bargain, while vendors may be looking to hold off until we see more stability in the market. As we look to gauge where the current investment market is at, there have been a limited number of investment sales of industrial use land in the past few months.

An industrial plant at 184 Cavan Road, Dry Creek transacted on 26 June for $3.63 million. The property comprises a 1.5 hectare site improved with a 1980’s built industrial facility of 3,916 square metres of lettable area. The facility is leased to Spring Gully Foods for ten years with two further options of five years each and fixed rental increases of 2.75 per cent per annum. The property has a commencing net income of $300,000 per annum, less non-recoverable land tax, calculated at $32,654 on a single holding basis. The net income of $267,346 per annum analyses to a yield of 7.36%.

Another recent sale in the industrial market occurred in the southern precinct of Lonsdale. The industrial office and warehouse at 27 Heath Street, Lonsdale transacted on 14 April for $1.55 million. The property comprises a 6,123 square metre site improved with a 1979 built industrial building of 2,152 square metres of which 241 square metres is office space and 1,911 square metres is high clearance warehouse. The building is currently leased to Yumbah Aquafeeds Pty Ltd until 14 December 2020. The property is utilised by Yumbah Aquafeeds as a food manufacturing plant to produce feed for abalone throughout Australia, which are then exported worldwide. The property has a passing net rental of $118,838 per annum which analyses to a yield of 7.67%.

These sales still represent solid and concise yields in the 7% to 8% band, with yields for high quality industrial facilities in the premier industrial precincts such as Regency Park registering in the 6% to 7% band. Our previous industrial updates highlighted the yield compression that occurred throughout 2019, however the current economic contraction may halt the yield compression to date but that remains to be seen. We are anticipating that sales at the higher price points will be for properties and industrial facilities where long term leases are in place, providing the investor with a more secure cash flow.

Finally, as touched on in our previous industrial update, there is a growing consensus that the industrial supply chain to and from China will

South Australia

The majority of purchasers entering the market this year will be expecting a bargain, while vendors may be looking to hold off until we see more stability in the market.

The industrial plant leased to Spring Gully Foods at 184 Cavan Road, Dry Creek Source: realcommercial.com.au

The industrial office/warehouse leased to Yumbah Aquafeeds at 27 Heath Street, Lonsdale Source: realcommercial.com.au

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change as a result of the current COVID-19 pandemic. A number of industry professionals believe that Australia will move to become less reliant on China and this may spark a manufacturing revival in the state. We expect that investor sentiment will remain at lower levels for the near future as the economic data continues to filter through. While share markets have seen a V-shaped recovery since the first major declines in late March, the picture will become clearer as more economic data is revealed in the latter part of 2020. Investor sentiment shifted from retail to industrial investments throughout 2019 and we expect that trend to continue, however investors will remain relatively cautious in the current market.

Finally, as touched on in our previous industrial update, there is a growing consensus that the industrial supply chain to and from China will change as a result of the current COVID-19 pandemic.

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PerthPrior to the advent of the COVID-19 pandemic, market participants were quietly optimistic that 2020 would mark the start of a revival in the industrial property sector. However since March 2020, local market activity has diminished.

The impact of the COVID-19 outbreak on the local industrial property market is particularly difficult to gauge given the short amount of time that has elapsed since the first case was reported in WA and the ‘lock-down’ measures introduced.

What is clear is the very low volume of confirmed investment-based acquisitions thus far in 2020.

As trading restrictions in Western Australia have been gradually eased there are signs to suggest the industrial sector has not been as acutely impacted by the pandemic in comparison to retail, hospitality and tourism aligned properties, with the latter two property sectors being impacted by forced closures.

The limited number of recent transactions suggests purchase demand for securely leased investment property remains firm on the back of the prevailing low interest rate environment.

Yields for prime industrial assets have remained relatively stable and tending to range between 5.50% and 6.50% whilst secondary assets command anywhere between 7.00% and 9.00%.

The level of return is dependent upon a variety of factors including the age and utility of the improvements, length of lease covenant, tenant profile, price bracket and location.

Of the limited number of transactions during the last six to nine months we provide the following as examples: Analysed Sale Sale Passing Market Address Date Price Yield Yield

105 Winton Rd, Joondalup Mar-20 $2,600,000 6.87% 6.55%

36 Hemisphere St, Neerabup Feb-20 $5,200,000 7.90% 5.79%

150 Quill Way, Henderson Dec-19 $19,900,000 8.54% 7.94%

7 Hanwell Way, Bassendean Dec-19 $4,200,000 8.00% 5.60%

380 Victoria Rd, Malaga Dec-19 $7,000,000 8.57% 8.57%

61 Bushland Ridge, Bibra Lake Dec-19 $9,000,000 6.58% 5.89%

Buyers for industrial investments range from local, private ‘mum and dad’ investors typically via self-managed super funds (SMSF’s) through to institutional players and A-REITs such as Primewest and Charter Hall. Syndicators, both WA and interstate based, are also active within the industrial investment asset space.

We suspect the ever-growing popularity of

e-commerce (i.e. on-line shopping) to provide a degree of resilience to the industrial sector with greater demand for large scale warehousing and facilities that support transport and logistics, although such buyers are likely to be hindered by low stock levels in Western Australia.

These properties appear to be the more preferred asset class with better prospects for capital growth compared to the retail or office sectors, as evidenced by a recent spate of acquisitions along the eastern seaboard.

There still remains a threat to the industrial property market from a broader macroeconomic downturn as a result of the deterioration of wider business conditions caused by the pandemic, disruption of supply chains and the associated ‘lockdown’ of other State economies brought on by a resurgence in confirmed cases similar to what has occurred in Melbourne.

Western Australia

These properties appear to be the more preferred asset class with better prospects for capital growth compared to the retail or office sectors.

Indicative yields

Prime 5.5% to 6.5%

Secondary 7.0% to 9.0%


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DarwinThe weak economic outlook (even pre-COVID-19), high vacancy rates and large supply of available land has meant that investors have made themselves almost entirely absent from the Top End industrial property market in 2020. Almost all transactions have been purchased by owner-occupiers who, if they have been able to retain a profitable business, are looking to purchase accommodation to suit their own requirements in the current weak market.

As a result, we are seeing very few transactions occurring at any level. Investors generally see the risk profile, especially for vacant property which may have an extended letting up period, as being too high.

There is an exception for property where the primary focus is cash flow and the location is a secondary consideration. In this regard we note the sale of the site of Bunnings Palmerston. This will reportedly be the second largest Bunnings in Australia when it is completed later this year. The property has a strong lease to Bunnings and will reportedly transact for $43 million which would be a 5.7% yield. This would be one of the lowest yields ever achieved in Darwin but this type of activity is limited to these types of large corporate style investments.

Generally speaking, sales of Darwin industrial property with more typical three to five-year leases to local tenants would have difficulty in achieving yields below 8% unless there were mitigating factors such as further development potential. Vacant property that may require incentives or an extended letting-up period can easily exceed 10% or even 12% for older style property. Even at these levels, investors would be extremely cautious with these types of property.

Northern Territory

Almost all transactions have been purchased by owner-occupiers who, if they have been able to retain a profitable business, are looking to purchase accommodation to suit their own requirements in the current weak market.


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Australian Capital TerritoryCanberraCanberra has seen reduced industrial investment sales over the last six (6) months mirroring a trend experienced across Australia’s major markets due to the COVID-19 pandemic.

While the industrial market tends to be dominated by owner occupiers, several transactions in Fyshwick towards the end of 2019 demonstrates healthy investor demand for industrial complexes with agents reporting strong interest from Sydney investors chasing yield (circa 6.75% to 7.75% ACT industrial yield range more broadly) that is simply not available in Australia’s largest city.

Agents in the capital continue to report reasonably strong investor interest however limited stock to truly test the market and buyer appetite.

The Canberra commercial valuation team is watching the current market with interest and hopefully we will be able to advise more detailed investment indicators for our next industrial market review.

Agents in the capital continue to report reasonably strong investor interest however limited stock to truly test the market and buyer appetite.

Fyshwick industrial Source: realcommercial.com.au

ResidentialAugust 2020



Entries coloured orange indicate positional change from last month.

National Property Clock: Houses

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RISING MARKET

Start of Recovery

BOTTOM OF MARKET

DECLINING MARKET


PEAK OF MARKET


Starting to Decline

AdelaideAdelaide HillsAlburyBarossa ValleyBathurst

CanberraDubboGeelongHobartTamworth

BrisbaneIpswichSydney

CairnsKarrathaMelbourne

NewcastleWodonga

Ballina/Byron BayBroomeGeraldton

KalgoorlieLismore

Sunshine Coast

Alice SpringsCentral CoastCoffs Harbour

PerthSouth West WASouthern Tablenads

Burnie/DevenportEmerald

GladstoneGold Coast

Hervey BayLaunceston

MackayMount Gampier

Port HedlandRockhampton

Shepparton

IllawarraMildura

Southern Highlands

ToowoombaTownsville

Whitsunday



Entries coloured blue indicate positional change from last month.

National Property Clock: Units

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RISING MARKET

Start of Recovery

BOTTOM OF MARKET

DECLINING MARKET


PEAK OF MARKET


Starting to Decline

AdelaideAdelaide HillsAlburyBarossa ValleyBathurst

Central CoastGeelongHobartTamworth

BrisbaneCanberraGold Coast

IpswichPerthSydney

Ballina/Byron BayBroomeGeraldton

KalgoorlieLismore

Burnie/DevenportCairnsLaunceston

MelbourneWodongaKarratha

Sunshine Coast

Alice SpringsBundabergCoffs HarbourDarwin

South West WASouthern TableandsToowoombaWhitsunday

DubboGladstone

Hervey BayMackay

Mount GambierPort Hedland

Rockhampton

EmeraldIllawarra

MilduraMt Gambier

SheppartonSouthern Highlands

Townsville

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OverviewThere are different buyer types operating across the nation’s various market, but arguably the ones most keyed into the unemotional metrics of a given location, property type and price point are investors.

Investors are looking for return on the dollar, and in the fast-changing times in which we live, staying on top of the shifts is a challenge.

This month, our team present their “investor playbook” of real estate performance within each service area.

SydneyThe last few weeks has seen an increasing number of COVID-19 community transmissions in Melbourne and then Sydney. Whilst, at the time of writing, Sydney has not seen a return to the lockdowns experienced in March and April, there is no doubt consumer confidence is again starting to decline as a result of an apparent ‘second wave’.

Home values across Sydney have continued to decline over the past month, dropping by 0.9% over that time according to CoreLogic. Whilst values are still up by 2.8% since the beginning of 2020, if the current trend continues, it would mean prices falling a further 5 to 6% by the end of the year.

HOME VALUE CHANGES WEEK ENDING 12 JULY

Source: CoreLogic

Auction numbers and new listings continue to remain fairly strong for this time of year, although auction clearance rates have eased to around 60% over the past few weeks. The clearance rate at in the same period last year was above 70%, although with a lower number of auctions, as the market began its recovery at the time.

And now onto the property investors playbook

The residential property investor market has had some significant hurdles placed in front of it in recent years. Tougher lender and regulatory requirements around investor loans, and the threat of removal of negative gearing and capital gains tax allowances prior to the federal election in May last year, significantly reduced the number of investors looking to get into the market. As these lending restrictions eased and the threat to tax allowances was extinguished, the investor market began to recover along with the wider market as prices started to rise.

That recovery has now come to an abrupt halt as a result of COVID-19, as asking rents have fallen sharply, while vacancy rates have climbed, across many parts of Sydney.

According to CoreLogic, across the financial year to June, Sydney dwellings saw an average 16.7% return with 13.3% of that through capital growth.

New South Wales

Houses enjoyed a 17.7% return with 14.5% capital growth, while units had a 14.7% return with 10.6% of that being capital growth.

TOTAL RETURN FOR 2019/20 FINANCIAL YEAR

Source: CoreLogic

However with prices now falling and rental yields also under downward pressure, returns in the current financial year are likely to be significantly leaner.

As can be seen from the table below, vacancy rates in the Inner and Middle ring suburbs have been particularly hard hit since March, while the Outer suburbs have continued to see a tightening vacancy rate.

Sydney July 2019 March 2020 June 2020

Inner 3.0% 2.5% 5.8%

Middle 4.1% 3.6% 5.2%

Outer 3.4% 3.0% 2.6%

Total 3.5% 3.0% 4.5%

Residential Vacancy Rates (Source: REINSW)

The Inner ring suburbs have seen an increasing supply of properties, particularly units, as previous holiday-stay properties were switched over to the long term rental market, and new unit completions have continued to hit the market. New unit

Home values across Sydney have continued to decline over the past month, dropping by 0.9% over that time according to CoreLogic.

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lower than what they were sold for over the last few years, however this is assuming that someone can tolerate the reduced rental income and ‘ride out the storm’ until the market starts to recover.

On a positive note this region of Sydney is always going to benefit from proximity to the CBD, good infrastructure and various services and amenities which make the inner suburbs of Sydney a popular place to live and invest in property. The area is already well serviced for public transport, however the future Metro West and Metro City & Southwest lines will provide additional transport options for some of these inner ring suburbs.

Future Metro Lines and Stations Source: Sydney Morning Herald

As always we believe that the strongest investment properties over the long-term will be those that are well-positioned, quality-built/designed, lower density developments and freestanding/semi-detached dwellings or the older properties that have renovation upside.

A recent sale of a two-bedroom apartment at 612/149-161 O’Riordan Street, Mascot is a good example of this. Previously sold during April 2016 for $800,000 and has recently been sold during July by the same agency for $790,000. This result demonstrates how investment grade properties within certain high-density locations are performing subpar when compared to owner occupier style properties such as freestanding homes or larger modern townhouse/terraces within the surrounding area. Current asking rents for two-bedroom units within the building range from $600 to $700 per week.

149-161 O’Riordan Street, Mascot Source: realestate.com.au

Based on what we are seeing, and information from local real estate agents, it appears that more first homebuyers are entering the market which does help increase demand for some of the investment style apartments, however there is still an oversupply of apartments advertised for sale and lease within these locations such as Zetland and Mascot. Going forward it seems unlikely that this trend will significantly improve in the near future particularly while the impacts of COVID-19 are at play.

There are currently opportunities to purchase investment properties at prices similar or even

completions are also impacting supply in some middle ring suburbs.

Demand levels are not increasing at the same levels as supply as immigration has been stopped and is likely to be impacted for some time to come. Demand from international students has also dropped dramatically as a result of COVD-19.

With values at the lower end of the market holding up better than other price points, and vacancy rates continuing to tighten in the outer ring, Western Sydney is looking like the best place for investors for returns in the short to medium term.

Inner RingAgents within the inner city/east are reporting only a slight drop in listing numbers for owner occupier type properties, with an increase in off market activity within this market segment. However, investor activity appears to have dropped sharply, particularly in more homogenous medium and high density areas such as Haymarket, Zetland and Forest Lodge. This is largely driven by declines in rental demand pushing rents lower and therefore reducing overall returns. According to SQM Research residential vacancy rates for Zetland peaked in May at a record high of 6.0 per cent and have slightly reduced to 5.7 per cent throughout June. A similar trend can be seen at Mascot with vacancy rates peaking in June at 7.4 per cent as per SQM Research. Across the city within the inner west suburb of Pyrmont house rents fell by 11.8 per cent over the past year (Domain).

The sharp reduction in rental demand within these locations is resulting in lower rents and extended vacancy periods, this ultimately has a negative effect on sale prices given that investors are concerned about rental returns and also whether there will be any upside capital growth in the next few years.

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Parramatta have shown a higher annual return than their two-bedroom counterparts, as shown in the table below.Address Median Price Median Rent Yield

1 bedroom units $455,000 $420 4.80% in Parramatta

2 bedroom units $580,000 $465 4.16% in Parramatta

Source: Realestate.com.au

In the south, units in Mortdale and Oatley are still providing reasonable rental returns whilst vacancy rates in these suburbs have remained reasonably low compared to neighbouring suburbs along the railway line, which have had a greater supply of new units into the market. According to SQM Research, the vacancy rate in June for the Mortdale/Oatley postcode was 1.7 per cent, compared to 4.9 per cent in the Penshurst postcode and 4.7 per cent in the Hurstville postcode.

A two-bedroom, one-bathroom, unit with one-car garage, recently sold in Rosa Street, Oatley for $700,000. The 1960’s ground floor unit, with a dated but well maintained fit out, positioned within short walking distance to Oatley village shopping, cafes and railway station. The unit was leased to a long term tenant for $520 per week, providing a rental yield of 3.9%.

1/11 Rosa Street, Oatley Source: CoreLogic

return home. A recent example of this would be 139 Woodland Street, Balgowlah sold for $2.88 million in July through Cunninghams Real Estate with an original asking guide of $2.75 million.

139 Woodland Street, Balgowlah Source: CoreLogic

Investors have traditionally been attracted to new units as their investment vehicle thanks to their lower entry price point than houses, location to essential services and low maintenance compared to a detached house in the suburbs. However investors must proceed with caution with many cases of settlement valuations not meeting the original price paid off the plan. This can occur years after the initial purchase has been agreed upon. If you have concerns, our advice is to engage an independent valuer to provide a valuation on the property.

An example from Sydney’s central west is 114/9 Paddock Street Lidcombe, a 2 bedroom 2 bathroom unit which sold off the plan in March 2017 for $810,000 however has now relisted with an asking price of $700,000 to $750,000. Given the amount of proposed units to be built in the local area and the current market conditions this trend will no doubt continue in the short term.

In comparing rental returns of one and two-bedroom units, one-bedroom units in

Middle RingInvestor activity has certainly reduced on the Northern Beaches as many local suburbs have a strong reliance on the Tourism and Retail sectors. The unit markets in Manly, Fairlight and Balgowlah have seen the biggest reduction in activity, having the largest drop in weekly rents and higher vacancy rates. SQM Research indicates weekly asking rents for units in Fairlight have been slashed from $895 in February 2020 to $690 as of July 2020. Capital values have not declined at similar levels thus reducing potential yields. A recent example of this reduction would be 1/40 Rosedale Avenue, Fairlight. This two-bedroom, one-bathroom unit was recently leased for $600 to $620 per week after being previously leased for $745 per week in 2019.

1/40 Rosedale Avenue, Fairlight Source: CoreLogic

Investors range from local, out of towners and international buyers. Australia has performed quite admirably against COVID-19, particularly when benchmarking against other countries. A number of agents have noted stronger activity, particularly for housing, from international buyers and expats. As the uncertainty in the global markets make the Australian property market a relatively safer investment, and many expats are looking to re-enter the market as an investment that they can turn into their family home should they need to

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725/1-39 Lord Sheffield Circuit, Penrith Source: realestate.com.au

The investor market across the South Western Sydney suburbs, in particular the Liverpool LGA, is generally very active as it offers a range of investment opportunities across a variety of asset classes.

The rental market is very competitive which has seen rentals stagnate and in some areas fall. The capital growth in property that has historically driven investor interest is no longer prevalent with some asset classes’ showing a decrease in value from the peaks of the 2016 and 2017 period.

Currently on realestate.com.au there are approximately 99, modern two-bedroom two-bathroom units available and approximately 160, three-to-four bedroom homes available for rent within the Liverpool LGA.

The entry level of the investment market is driven by affordability and low risk. This is where you typically find your Mr and Mrs Citizen well represented as they are looking to park their savings into the property market rather than in a low interest bank account.

Popular investment opportunities for this market are modern units in the sub-$600,000 range, a single house in one of the modern estates in the

1 Kipling Drive, Colyton Source: realestate.com.au

1 Kipling Drive, Colyton Source: realestate.com.au

As seen in other parts of the city, new units can quite often sell below the previous purchase ‘off the plan’, even after several years. An example of this is 725/1-39 Lord Sheffield Circuit Penrith, a two-bedroom, two-bathroom unit which sold off the plan in February 2017 for $584,000 however re-sold in March 2020 for $505,000. The off the plan purchase was unable to be supported even in 2017.

Outer RingThe residential investment market is currently in uncharted territory with the Corona-virus pandemic hitting many households. Whilst state and federal government initiatives have helped keep some calm in the market, there is a lot of speculation from property professionals that the longer this pandemic goes for the more stress there will be on both tenants paying their rent and investors paying their mortgages. As a result this potentially could see an array of properties hitting the market within a short period of time which could put downward pressure on property prices.

However, at the time of writing, Western Sydney has experienced a lower impact from COVID-19 in comparison to other areas of Sydney such as the inner suburbs which have a higher apportionment of renters and unit supply.

In the greater west, a popular investment option comes in the form of a house and granny flat which can provide a second rental stream and depending on the location, potential for longer term capital growth.

An example of this is 1 Kipling Drive, Colyton, located nearby to St Mary’s which is set to be a major transport intersection linking the existing rail line to the Western Sydney Aerotropolis at Badgerys Creek. The property is a partially updated 3 bedrooms, 1 bathroom on 632 sqm of land. Detached at the rear is a 2 bedroom, 1 bathroom, self-contained granny flat.

The property sold in May for $659,000, with a combined rental potential of $700 per week, calculating to a gross rental return of around 5.5%.

In the greater west, a popular investment option comes in the form of a house and granny flat

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This could be argued as the mindset for the savvy property investor following on from “lockdown” measures imposed on the economy since March 2020. And how could you blame them – record low interest rates, a market sentiment that is a little unsure of itself and generally treading the waters to see what is available and how to act with the available information.

The fallout from the “lockdown” still remains to be seen within its entirety. However, the Lismore/Casino/Kyogle regions are proving to be rather resilient in face of the obstacles compared to their more sizeable metropolitan cousins. One thing is certain – if you can “tick all the boxes” for the lender and satisfy myriad of conditions that they currently adhere to, then, what a time to invest in property!! The available interest rates from 2.09 per cent to 3.0 per cent fixed or variable are at unprecedented lows (there’s that oft used word again!!) and are not expected to rise significantly for some time yet. So, the return on investment becomes just a little bit more attractive.

Property investors with Lismore, Casino and Kyogle are primarily interested in “rental return” as capital gain is not traditionally considered to be particularly strong due to being a relatively steady market that is not subject to the volatility experienced by more coastal localities.

That being said, there are some opportunities for property investors which require a bit of thought and persistence.

We have noted that thanks to some forward thinking from the local Councils in the recent past i.e. Lismore, Kyogle and Richmond Valley who have seized on “updating” of their respective LEP’s (Local Environmental Plan) and DCP’s (Development Control Plan) since 2012, with the encouragement for medium density development

Moving away from your traditional investment classes, the rezoning of land in the South West, particularly in designated Growth Corridors and the Aerotropolis Precinct has seen property prices skyrocket. For the broader residential market you have most likely missed the boat, but for those lucky enough to have owned land prior to any hint of rezoning taking place, developers are paying well above what could have ever been imagined for these traditionally rural areas. Nowadays these areas are occupied by developers and established land bankers.

A recent sale of a one-hectare site in Austral, sold in April for $2.625 million. The previous sale of this property was back in 2014 for $1.855 million, a 41 per cent increase in six years. Another property in Bringelly sold in May for $2.3 million. The previous sale was back in 2015 for $1.15 million, a 100 per cent increase in five years.

Western Sydney is currently considered the best place for returns, given the varied properties to invest in. We believe a well located house and granny flat provides a great option for their higher yields and depending on the location, future development potential given the land component.

In other parts of Sydney, investors can look to play the long game and bear the short term loss of rents, for the ability to secure a property at a discount, and also take advantage of current low interest rates. There is value across all levels with strong medium to long term capital growth opportunities.

Lismore/Casino/Kyogle“When I stepped out into the bright sunlight from the darkness of the COVID-19 lockdown and sharemarket fail, I had only two things on my mind… property investment and renovation” (said someone).

sub-$750,000 range, or a house and granny flat set-up. All three property types achieve reasonably safe returns and can come with some tax benefits as well.

Notwithstanding the below examples, duplex pairs and small unit blocks provide additional investment opportunities however they require a larger capital outlay.

A two-bedroom, two-bathroom unit in 12-14 George Street Liverpool sold in March for $460,000, with an assessed gross yearly rental of $20,650, representing a 4.5% yield. However the previous sale in March 2016 was for $519,000, meaning an 11% decrease in value over four years.

A modern four-bedroom, two-bathroom house in a new estate in Edmondson Park sold in April for $730,000, with an assessed gross yearly rental of $26,400, representing a 3.6% yield. Whilst the rental return is not as strong as a unit may be, this type of property traditionally will show superior capital growth.

A recent sale in Edmondson Park Source: CoreLogic

A recent sale of a house and granny flat in Lurnea in June for $835,000, would likely achieve a gross combined annual rental of $38,400, representing a 4.6% yield.

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to graciously gift $25,000 to those looking to build new or renovate their existing residence looks appealing, but remember,you need to spend $150,000 to receive that “gift”. For those property investors building new, that $25,000 could go a long way in providing some additional features i.e. solar power system, ducted air conditioning that may or may not be covered in the building contract.

Therefore, to summarise, for the property investor in these areas of Lismore, Richmond Valley and Kyogle there is a significant degree of “research, research, research”, not just “location, location, location”.

Byron BayAs Covid-19 travel restrictions have eased, property sellers and real estate agents have heaved a collective sigh of relief. Property sales have kicked upward over the last month in the Byron Shire as intrastate and interstate travel brought non-local buyers back into the fold. But in the blink of an eye, we are faced with border closures on the Murray River and hot spots in Sydney restraining the market once more. It is truly a fluid situation and one that will develop further as rates of Covid-19 infections wax and wane.

The COVID-19 issue is of particular relevance to the Byron Shire market as many of the transactions that occur are for investment purposes with many of those investors originating from Sydney, Melbourne and Brisbane with a smattering of buyers from overseas. The absence of these buyers from the market because of coronavirus has caused much angst to sellers. In turn, some absentee investors have resorted to purchasing properties sight unseen in what must be an indication of their strong desire to invest in the Byron Bay area. Maybe it’s a bit of FOMO?

not only provides an additional revenue stream as opposed to just plonking a large house on the site BUT also the potential to “strata” subdivide and create two separately saleable properties. There is also the double-whammy effect of securing depreciation allowances for a new build. That is likely to whet the appetite for the savvy property investor.

It is difficult to see the advantage in purchasing a house for the sake of a rental investment without some thought given to improving the overall value of the property with simple renovations or improvements. As an existing house, the net rental yield rates can be as low as three per cent per annum. However, if such a house is wedged into the front corner of the lot and is relative flat or has a gentle slope, there could be the possibility to either construct a secondary dwelling or detached, Council approved granny flat to boost rental return. This avoids having to purchase bare land in order to build and provides the advantage of securing some rental from the existing house while “Doug the Builder” (Bob’s uncle) creates a masterpiece in the back yard.

There is no real determining price point or specific suburb as everything comes down to buying well regardless of the location and buying the property “as is” without any hint to the owner or agent about your plans for the property. As long as the fundamentals are in place i.e. building setbacks, private & open space, any property with a land lot size in excess of 800 square metres, such development to improve rental return could be achievable.

The recent announcement of Federal Government

in certain localities which benefit from proximity to the CBD, hospital, schools and other key municipal infrastructure.

For example, the ability to subdivide a 950 sqm corner site into two vacant freehold lots and approving a dual occupancy on each lot. Hence, four units permitted on an original single lot. Sure, there are private open space and building setbacks to consider. However, through a bit of creative building design and negotiation, such developments can become a reality now and provide a welcome relief to a tight rental market.

Other avenues that property investors look for in this area is the existing block of original flats where the rental return may be improved by a “slight adjustment” of the existing (and possibly low) rent levels to a market rate. For example, a recent sale in Girards Hill of 5 x two-bedroom flats for $910,000 returning 5.57% in its original condition. With a bit of targeted renovation to the kitchen & bathroom areas and some cosmetic attention to floor coverings, could see the rental levels increase. This is aided by the already strengthening demand in rental accommodation.

Certainly, better than current term deposit rates or a slap in the face from a half-frozen snapper.

Even better, if the block of flats is designed in such way to allow strata subdivision, then the creation of separate titles could paved the way for some capital gain and the ability to improve security for lending finance on individual titles.

Detached dual occupancies on a single lot with separate driveway access to each unit has been relatively popular in new residential estates as it

Certainly, better than current term deposit rates or a slap in the face from a half-frozen snapper.

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economy in Australia and the world with a rise of these threats. First home buyers are able to apply for discounted mortgage rates, stamp duty rebates, and renovation/construction incentives which may help fuel this part of the market in the near future.

NewcastleThe Newcastle and Hunter region property market has continued to hold steady through the ongoing pandemic. Whilst buyer uncertainty has not stopped investors purchasing property, the volume of quality properties on the market has not fully recovered but it’s on its way.

Property prices in Newcastle and Lake Macquarie rose ever so slightly in the last three month period even with the region shedding 24,000 jobs.

Agents have noted that investors from outside of the region are showing interest in purchasing investments. With the pandemic and with people still working from home, investors looking for a sea change have Newcastle and regional properties under the microscope.

Property experts are predicting there could be market movement later in the year which we will be monitoring for future discussion.

The good news is that properties in the areas are still selling even though there is less stock on the market. The overall volumes are quietly increasing as we get further into the back half of the year. Areas around Lake Macquarie and Maitland areas are still popular for investors looking to buy land and build property. Vacant blocks of land are still selling for similar prices before Covid 19 hit earlier this year.

The suburb of Eraring in Lake Macquarie saw the sale of one of the largest waterfront properties available. It’s sold for an undisclosed amount which

as a future retirement destination or as a holiday home, so rental return is but one facet of some investor’s decision process.

Clarence ValleyCOVID in the Clarence Valley is not having much impact as auctions, borders have been opened up allowing people to travel to the Valley more easily.

Investors see the Clarence Valley as a safe haven from a downturn in the market due to broader economic conditions. Cashed up buyers are spending above $1 million on canal or Yamba Hill properties to be used as holiday homes or as longer term rentals. Investors also are seeking rural residential properties to get out of the city life due to the Coronavirus impact in the cities restricting movement of people. Investors are mainly from the Gold Coast/ Brisbane and Sydney areas.

The Valley is typically cheaper than Ballina to the north and Coffs Harbour to the south. The Clarence also is benefitting from Government spending on a M1 Motorway upgrade and a new large Jail in the region. In Grafton, rental return net is expected to be around five per cent although in Yamba on the coast capital gain recently has been and strong 6.1 per cent per annum (realestate.com). Agents are reporting a lack of stock and good buyer enquiry.

In the future the Clarence Valley will benefit from the M1 Motorway joining Ballina to Coffs Harbour reducing travel time also to the Gold Coast and Brisbane to two hours approximately and the new Jail creating jobs. However, the risk is the broader

There are some locally-based investors active in the area as well. There is very little new land being released in the Byron Shire but with a growing population there’s increasing pressure on housing affordability, particularly for first home buyers, and with a large portion of the population unable to afford a unit or house (see last month’s topic “lazy $700,000”) and a steady turnover of short-to-medium stay holiday makers utilising AirBnb style properties, there is consistent, if not strong, demand for rental accommodation.

Because of the high buy-in prices of property in the area, investors are looking to maximise returns by utilising the holiday market or by purchasing properties with multiple letting opportunities such as dual occupancy properties. Yields for investors in the area can appear to be relatively modest. For example, a one-bedroom unit in a new development on the northwest fringe of Byron Bay recently sold for $610,000 and was leased for 12 months at $550 per week, or $28,600 per annum, gross income. That reflects a gross yield of 4.68 per cent. Costs such as rates, body corporate fees, management fees and incidentals will eat away at that before the buyer has to meet their mortgage payments. The relatively modest return is a reflection of the popularity of the area. In the more central and beachside locations of Byron Bay, yields are firmer still. It’s a good thing we still have negative gearing, right?

Many of those absentee buyers are not, however, investing for the rental returns alone. The properties they buy are seen by many investors

Some absentee investors have resorted to purchasing properties sight unseen in what must be an indication of their strong desire to invest in the Byron Bay area.

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new build duplex or triplex developments seem to attract out of towners predominantly, often SMSF’s. We speak often of affordability in the region, and this is not lost on the investors. The entry level to property investment in the region has attracted Melbourne and Sydney investors and also locals investing in their towns, we have definitely less out-of-town transactions in the past 12 months however In Albury-Wodonga, Myrtleford, Kiewa Valley and Wangaratta, the local investor has been active.

The investor seeking gross rental returns of six per cent to eight per cent and possibility of positive gearing are evident in the market. The price range for a basic house is creeping up, however we are still seeing sales in the $200,000 to $300,000 bracket, and this would be the most popular range, units are lower than this, range of $140,000 to $240,000 bracket, some one-bedrooms, but more two-bedrooms, available. The more modern houses, price range from $300,000 to $450,000 are more likely four bedrooms, and there is definitely a ceiling on rents that will be achieved and as the purchase price increases returns drop as the cost of renting starts to look less appealing and more people consider buying over renting.

One market segment with active investors has been modern homes being rented to university students, especially in Thurgoona, and with more new homes under construction and the FHBS ramped up, and universities feeling the strain from the pandemic, this segment may be under pressure from downward rent and a possible oversupply of dwellings. Albury-Wodonga has seen some modest lifts in resales from investors buying, renovating and flipping basic homes, many

iconic Murray River. A seamless community with border town residents not giving much, if any thought to crossing the state border every or even several times a day pre-COVID-19. The very serious second wave challenging the state of Victoria is a real blow for communities already suffering from the effects of the summer bushfires and the effects of the first COVID-19 lockdown, a real time example of one step forward, two steps back.

Needless to say, the closure of the NSW border with Victoria has been disruptive, stressful and logistically challenging, however any measures to assist in flattening the curve of the second wave must be undertaken with genuine compliance. The sectors most at risk in our patch are tourism, hospitality, education and the flow on effects to unemployment in the region. We hope that this time next month we might be able to report some better statistics for Victoria and that somehow NSW has avoided the same fate. The pandemic has proven it is a long game and complacency has dire consequences. In some ways, discussion about property markets does seem second tier, however all our staff have been amazing and continue to service all areas adhering to the restrictions in place without complaint.

The Albury-Wodonga investor’s playbook focuses strongly on the lower end of the market, where opportunities for good rental returns or uplift from improving and reselling within a 12-to-18 month period are both popular choices.

There is a limited amount of transactions in the flats building market, although these do appeal to local and out of town investors, whereas the

is believed to be around the $4 million mark which would be a suburb record and also one of the highest in the Lake Macquarie region.

Lake Macquarie sale Source: Domain.com.au

In the Port Stephens region north of Newcastle a property overlooking Dutchies Beach in Nelson Bay recently sold for a record $3.195 Million which is the highest price paid in the Nelson Bay area for a residential property.

Port Stephens sale Source: Domain.com.au

AlburyWhat a difference a month can make in our new world living with a pandemic. Our patch encompasses Albury-Wodonga and stretches east to Corryong, west to Mulwala/Yarrawonga and north and south of the NSW-VIC border along the

The Albury-Wodonga investor’s playbook focuses strongly on the lower end of the market.

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There is generally a rule of thumb that regional property markets normally experience a ‘time lag’ factor following larger city property market trends, this feeling can also be echoed on the subject of COVID’s impact. The unknown future economic impacts on regional communities do play on the minds of investors and owner occupiers alike, however the concept of having space to run with clean, fresh air and a safe remote working environment continues to provide larger regional property markets such as Tamworth with a distinct trump card.

The NSW Government’s First Home Owner grants continues to provide incentives to first homes owners, while the Federal Government’s Home Builder stimulus packages (which provides eligible owner-occupiers, including first home buyers, with a grant of $25,000 to build a new home or substantially renovate an existing home) are welcomed by the property industry and while still in its infancy it’ll be interesting to monitor the uptake of these stimulus packages over the back end of 2020.

IllawarraThe residential market continues to flow through the last month. Buyers appear to be well prepared to make an initial offer if they like the property, as selling periods are currently short they’re not prepared to risk waiting.

Recent sale highlights include a modern four-bedroom house on the Grove in Austinmer for $2.925 million, a two-story dwelling in Bellambi for $1.2 million and the reported sale of The California Manor on Reddall Parade, Lake Illawarra (price undisclosed).

active cases. Despite the challenging times we live in and surprising to many, the residential and rural residential property in our region market continues to perform reasonably well with generally stable property prices in residential and rural lifestyle properties.

While overall demand has softened slightly, investors in the New England North West are reasonably active in the major centres of Tamworth and Gunnedah with properties in the $200,000 to $400,000 selling at or near their listing price with locations such as West Tamworth and North Tamworth continuing to appeal to the investor market seeking renovation and/or development opportunities at reasonable prices.

Generally, there is still solid demand for older dwellings located on larger blocks with multiple occupancy potential and the rental market in these localities remains stable with good duplex, triplex and flat building investments still providing a gross return of around six per cent in well-established areas and up to eight to ten per cent in the higher risk small rural towns and non-sought after suburbs in the regions larger centres. Investors chasing long-term capital returns are still active in the newer residential suburbs of Forest Hills/ Moore Creek and Calala.

Anecdotal evidence is still showing fewer high-value properties are listed on the market and selling periods have increased, this is a sign that many owner occupiers are continuing to bunker down through the COVID pandemic. At present, these higher value residential assets appear to be most vulnerable in this time of economic uncertainty.

in ex-housing commission estates and city central fringe suburbs, however the better money might be the astute investor purchasing these “ready to go” properties for long term investment. The goal is to strike a balance between location, purchase price, rent and quality tenants. Thankfully our region benefits from a broad employment base so there is a good cross section of industries seeking rental accommodation, in addition to the burgeoning Air BNB and short stay accommodation offerings which are available in Albury-Wodonga and throughout north-east Victoria.

So far, across the board, our markets are holding up well. That said, the latest development of Stage 3 lockdown for Melbourne and Mitchell Shire will have a significant effect on local tourism and events, especially in towns such as Bright, Beechworth, Yackandandah, Corryong, the King Valley and the ski villages of Falls Creek, Hotham and Dinner Plain. The ski season being closed is a loss for tourism, local businesses and seasonal employment in these areas and surrounding towns that capture these travelers, who cannot travel. This will be a market to watch over the coming months.

To end on a positive note, we are so fortunate to live in Australia and feeling very grateful to be living our best life in regional Australia, the investors alert is we are affordable, offer variety of property investment options, have NO traffic issues (once the border reopens) and if you can work from home…well just saying!

TamworthAs we approach the end of July and at the time of writing, according to the NSW Health the Hunter New England Local Health District has five confirmed cases of COVID with the Tamworth, Armidale, Gunnedah, Narrabri, Glen Innes, Upper Hunter and Inverell LGA’s currently recording no

Generally, there is still solid demand for older dwellings located on larger blocks with multiple occupancy potential.

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week mark. This same house would be worth approximately $675,000 which shows a potential gross yield of approximately 4.6 per cent. In comparison, a $675,000 two-bedroom unit in Wollongong could potentially rent for $525 to $550 per week. The benefits of purchasing a new investment property includes being able to tax deduct the depreciation with Herron Todd White being able to prepare a comprehensive tax depreciation schedule on your property.

The California Manor Source: xgxgxgx

Turning to the property investor’s playbook. Property investors appear to be active in the residential market at the moment, with record low interest rates being the main driver. The majority of investors are local ‘Mum and Dad’ type operators, looking to pick up a first or second investment property. This may be a house in a suburb that they’re familiar with, or a new unit or townhouse in a modern development.

Larger scale investors are also active and will target multi-occupancy properties to secure cash flow. Competition for unit blocks is often between local and Sydney buyers. A block of five x two-bedroom units on McKenzie Avenue sold recently for $1.45 million which analysed to a gross return of 4.98 per cent.

Earlier in 2020 a block of four x two-bedroom strata titled units sold in one line for $1.1 million on O’Connell Street Barrack Heights which analysed to a gross return of 5.44 per cent. While rental increases have been moderate in recent years, the low interest rates mean that yields have remained stable.

West Dapto appears to be a strong rental area at the moment with a modern four-bedroom house renting for around the $580 to $600 per

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MelbourneWith the global economy experiencing a tumultuous year due to the effects of the Coronavirus pandemic, many Australians have felt the impacts this has made on the property market.

While demand has remained fairly steady for properties in some areas, rental property markets have felt the pinch in the past few months. Latest statistics show that Melbourne housing values have dropped 1.1 per cent, the numbers of owner-occupiers had increased in demand by 0.5 percent and demand from investors has dropped by 0.3 per cent. (Corelogic, 2020)

Melbourne CBDHigh rise apartments in the city and fringe areas will suffer the largest price fall as a result of the Coronavirus. The past few months have also impacted the rental market as high rates of unemployment have led to many young people exiting the rental market and moving back in with parents, downsizing or sharing rentals to save money. This has greatly reduced housing demand, which has caused a spike in vacancy rates, leaving investors nervous about what’s to come. With immigration coming to a halt as well as a sharp decline in international students, investors will be feeling the pain over the next 12 to 24 months.

We are also seeing quite a number of nomination sales in the CBD market, as many investors are desperate to find a new purchaser to take over their property. Investors are doing this now as they had originally purchased these apartments 12 to 18 months ago and pre-committed to contracts, but with

VictoriaSTOP PRESS

Valuation deemed essential service in VictoriaDaniel Andrews declared a State of Emergency in Victoria and introduced unprecedented Stage 4 lockdown restrictions across Melbourne, effective 6pm Sunday 2 August 2020.

The Victorian Premier said an increase in COVID-19 related deaths and new infections compelled his government to implement a range of tough new penalties designed to reduce movement and the spread of the virus.

In response to the new Stage 4 restrictions in Victoria, the Australian Property Institute (API) has confirmed that it’s ‘business as usual’ for the valuation industry:

Under Stage 4 ‘Stay at Home’ restrictions, the Victorian Government has identified that the Financial and Insurance Services Sector, including critical banking services to support the provision of services, credit and payment facilities are allowed to open, and continue for On-Site work, while ensuring they comply with COVID safe work plans. Valuation services to support banking, finance and insurance activities fit within this definition – a position supported by the Australian Banking Association. You will be able to undertake valuations and should be mindful of your safety and the safety of clients or dwelling occupants.

We understand this new level of restriction will greatly affect the economy although we are fortunate in the valuation industry to still be in operation across the country and in Victoria.

HTW has undertaken a significant amount of work to prepare for the Stage 4 restrictions and continues to provide valuation services while working within the Government restrictions and industry protocols.

The main focus of leaders within the business is to ensure our high level of quality and service is maintained while protecting the health and safety of our people, our clients and your customers, as we continue to adhere to social distancing and personal hygiene regulations and remain in operation.

Our existing COVIDSafe plan has been updated for Victoria specifically to reflect changes in Government regulations and acts as an important guiding principle for our people to operate.

Please be assured that Herron Todd White will continue to be operate so as to service your requirements now and beyond this health crisis.

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The foreign investor market has been strong and steady in Mount Waverley and Glen Waverley for a number of years. The allure of purchasing rundown properties and redeveloping the site with brand new homes has been an attractive and profitable enterprise for local building businesses. This has not stopped due to the COVID-19 pandemic. In fact, the volume of to-be-erected valuations we are completing in these areas over the past four months has suggested that there has been a spike in these developments.

Inner and Outer NorthWe believe that at present, most demand is generated by owner-occupiers in these areas as many investors continue to be wary of purchasing in such economically uncertain times.

Investors who do decide to take a chance will often find themselves competing against first home buyers and at present we have observed that (while there is still ongoing activity) outer north suburbs have experienced some easing in demand. Inner north suburbs appear to be coping better in staving off the impacts of the economically tumultuous year so far, however given the number of recent Coronavirus outbreaks associated with these areas, we will continue to watch them closely for changes in the market, particularly in the short term.

Prior to the pandemic, investors had been drawn to the outer north by strong rental yields and affordable house and land packages, whereas inner north suburbs have traditionally experienced long-term capital growth but lower rental yields (with the exception of units). We have

as long as they will spend a minimum of $150,000. Investors are eager to get started as their property will realise its capital gains.

Inner and Outer EastWith changes in conventions for open house inspections, auctions, leasing and other facets of property management, we are adapting to the time we are now living in. There was a strengthening of confidence in the community with restrictions slowly easing, however as of 9 July, the state of Victoria has returned to Stage 3 lockdown protocols, which has not given the market enough time to correct or allowed us to analyse data surrounding this second wave of restrictions being imposed. There is no accurate data on what this second lockdown will do to the property market. More to come on that topic next month.

With restrictions being reimposed, it is difficult to say with certainty that property investors and developers are planning to carry on with big or small projects in the eastern suburbs of Melbourne. The doubt and uncertainty hanging over all investors’ heads at the moment is enough to deter most investors from purchasing property. That being said, there are many families in need of a quick cash boost due to the current financial situation they are facing. The investor market in the eastern suburbs is largely coming from existing owners investing in their own properties and undertaking partial or complete renovations of existing dwellings. We are seeing high levels of this in outer eastern suburbs such as Blackburn, Mooroolbark, Doncaster and Ashburton.

lending environments changing since then, they are unable to settle on their apartments, leaving some with no choice but to forfeit their deposits.

Outer South East As many Australians are adapting to new ways of life during this pandemic, the property market has been uncertain for many, as there are concerns and uncertainty about job security. First home buyers with job security are leading the way as confidence is returning to the Victorian property market as individuals are motivated by affordability and the flexibility a house and build can bring them.

The newer suburbs within the City of Casey and Cardinia are mainly driven by first home buyers looking to take advantage of the current economic conditions to purchase properties with the help of government grants such as the First Home Owner’s Grant, where a $10,000 grant is available to those looking to buy or build their first home for less than $750,000. Despite the current local demand for housing in these areas, AMP economist, Diana Mousina, predicts that, “demand will fall by about 80,000 for new dwellings due to immigration coming to a standstill due to the COVID-19 pandemic over the next two years.”

The investor market is quiet in outer south-east regions as suburbs in this area are newer estates, which are more popular for purchasers looking to build and then move in themselves as owner-occupiers.

Investors looking to also take advantage in this climate are predominantly looking for well-presented older properties in established areas, as they are closer to the CBD and within close proximity to public transport, shopping centres and schools. By purchasing an older property in an established suburb, investors can take advantage of renovation grants that provide a grant of $25,000

Investors looking to also take advantage in this climate are predominantly looking for well-presented older properties in established areas.

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GeelongGeelong has managed not to enter into the new restrictions currently being enforced across Melbourne which has required all hospitality to once again shut up shop and everyone to stay at home unless they’re heading to an essential service. It’s unknown whether or not Geelong will also have to re-introduce these restrictions as Victorian cases soar higher by the hundreds every day.

Once again, the level of uncertainty we are currently facing is extremely high and it has caused many to take a more conservative approach to the property market over the past few months, holding off on making any investment purchase.

On a positive note, as Geelong has not slipped back into harsher COVID-19 restrictions, the economy continues to rebuild and this can only rub off positively on the property market. After months of waiting, many may now launch into that investment purchase they have been holding off on from prior months.

Geelong remains a seriously sought-after region as it continues to expand in just about every facet with affordability compared to Melbourne being the number one driving force. You can most definitely get much more bang for your buck sifting through Geelong’s property market compared to Melbourne’s and this is highly attractive to many possible investors such as first home buyers or those looking to upgrade or upsize their current home. It’s a very active region for all types of investors and for good reason.

That being said, Melbourne’s western suburbs pre COVID-19 boasted some of the most affordable investment opportunities within Melbourne with high rental yields. To put things into perspective, the west’s rental yield average for houses sits 31 per cent above Melbourne’s gross rental yield of 2.7 per cent.

The highest median house price growth has been recorded in new suburbs over the past five years, led by Aintree, Weir Views and Fraser Rise, all located in the City of Melton. Their price growth ranged from 218 per cent in Aintree, where the median price is $617,000, to 136 per cent in Fraser Rise, where the median is $598,000 (realestate.com.au data).

Investors in Melbourne’s west vary in many fashions. It’s an attractive region for both first home buyers and those seeking an investment property with an aim of rental returns. Being the highest developing region in Australia, with new estates scattered across the region, the most common type of property for those investing is residential dwellings. With affordability being the driving force within the area, most opt for a large-scale builder such as Metricon or Porter Davis to build their home due to the much lower construction prices than that of smaller, private building companies.

Melbourne’s south-west has a completely different investment property market as it steers away from affordability and into quality and prime location. With the residential dwelling market being much higher within this region, many investors look to the unit and apartment sector due to its affordability.

noted that in many cases, investors in the outer north suburbs appear to be more attracted to new house and land package, and in the inner north, to apartments and townhouses.

Typical outer north suburbs such as Craigieburn, where the median house price is around $540,000, will likely achieve rental yields of around 3.9 per cent. By contrast, in Preston in the inner north, the median house price is $1.01 million and rental yields are around the 2.6 per cent mark. This is a clear example of where investors have traded off on rental yield in the hopes of realising future capital growth.

Median House Price Yield

Craigieburn $540,000 3.9%

Preston $1,010,000 2.6%

We do not believe that now is an optimal time for investors to purchase, particularly those who are risk averse. While we believe the recent implementation of the $25,000 Home Builder grant has done much to mitigate a larger reduction in demand in the outer north (where new builds are more prevalent), 2020 is in many ways unprecedented and there may be further declines in the market in the short to medium term.

Western SuburbsWith the second wave of COVID-19 spreading throughout many Melbourne suburbs, including the west, it’s been a real dampener for many people and businesses who are struggling to stay afloat and trying to make ends meet. It’s been a deterrent for basically anyone thinking about investing in any way in the property market due to the uncertainty we are currently living in. No one truly knows how long this will last or how it will affect the property market. It truly could make or break you if you did decide to invest in a property during these times. Geelong remains a seriously sought-after region as it continues

to expand in just about every facet

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or 1960’s detached dwellings if willing to do some renovation in order to secure a good tenant. Both of these categories offer potential for good returns. Our constant advice for landlords is to ensure that they do complete some regular maintenance to make sure they can attract and retain good tenants and to preserve the value of their asset.

With the recent announcement of the additional government stimulus package for building and renovation work, local builders are reporting a significant increase in enquiries. With several large residential subdivisions to open in the near future, this stimulus will likely bring forward building activity at a time when many markets are experiencing uncertainty.

Mildura The local market continues to show some uncertainty with agents still reporting reluctance by many vendors to put their homes on the market. This is more evident in the higher value range due to concerns that buyers may not yet be willing to pay a substantial amount in this time of uncertainty. Sales which are occurring indicate that values have held up well so far. Agents are reporting that more recently they have seen an increase in listings from the low point in April and May, however the current listings continue to mostly comprise properties at the lower to middle price point of the market.

Meanwhile the number of sales of vacant house lots have held up well compared to historic levels. The current government stimulus packages have helped keep buyers motivated. The impact of this increased demand will be closely watched to see if it has any effect on the value of existing dwellings.

Given the Sunraysia region’s relatively low median house and unit value and strong rental demand, there continues to be a market for the investor and we have yet to see any impact on values from COVID-19. Gross rental returns of between five and six per cent are typical for detached houses with slightly higher gross returns of up to eight per cent available for units.

While we do see some investment from out of town buyers, the majority of investment comes from local buyers, who prefer the idea of being able to see their investment, rather than investing in shares or other investments. The expectation that low interest rates are here to stay is also boosting investor confidence.

Investors have tended to be attracted to 1980’s or 1990’s brick units when looking for the maximum return and least responsibility, or at older 1950’s

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BrisbaneBefore we tackle this month’s theme, let’s see what there is to report on market changes under COVID.

Here in Queensland – as at the time of writing at least – we remain relatively in control of the outbreak, although the coming days will be testing. The result is that a tiny bit more confidence has etched its way back into our market.

Anecdotal evidence suggested a considerable slowdown in activity throughout April and into early May with a reduction in both properties for sale (supply) and buyers (demand).

As the lockdown restrictions eased, and Government stimulus measures were announced, values have continued to hold as open homes and auctions operate with some sense of normalcy.

The recent announcement of the JobKeeper and JobSeeker extensions – albeit at reduced rates and under new guidelines – will likely provide confidence that the ‘September economic cliff’ has been avoided or, at least, put off for a while.

And now onto a look at the investor playbook which actually feeds in nicely from our COVID commentary.

As a general observation, investors have remained relatively inactive in our market, but that doesn’t mean South East Queensland isn’t offering excellent potential for those looking to build their portfolio of assets.

So why has it been slow? If you’re looking to point the finger, then ‘uncertainty’ is your culprit.

QueenslandThe pandemic has thrown up all sorts of question marks around continued employment, rental vacancy rates, landlords’ insurance, borrowing capacities… the list goes on. It’s no wonder that there’s been relatively few investor transactions.

That said, we have plenty going for us too in terms of investment potential, so for those seeking a good capital-city prospect, Brisbane must be on the shortlist.

On the national front, interest rates are at extraordinary lows. Those who can clear the lending-guideline hurdles are certainly enjoying very affordable finance.

The other more local advantage playing into Queensland’s hands is that, as a destination, we look pretty good at the moment. Not only have we stayed on top of infection numbers but Brisbane and its surrounds offer a comparatively low-density city lifestyle with enviable weather and great coastlines within easy drive. Combine this with reasonably affordable real estate and you can see the upside.

In truth, it does feel a little like 2003 could eventuate all over again. At that time, Brisbane was viewed as the nation’s ‘cool capital’ with tens of thousands of new residents moving from southern

states to enjoy our booming jobs market and excellent lifestyle.

Obviously, that isn’t currently happening, but post-pandemic it will be interesting to see what sort of people movement occurs, and whether it will drive price growth in Brisbane.

As already mentioned, investor activity is slow at present, but there are signs that buyers are beginning to take interest – anecdotally at least.

We are hearing of an increasing number of buyers getting their financial ducks in a row so that if an opportunity to purchase at a discount due to some COVID-lead weakening, they can pounce.

So, what property types are attracting investor interest at present?

Most sub-markets within the detached dwelling sectors have remained fairly stable. There is some demand from investors for entry-level properties, although these need to be reasonably presented and within desirable locations.

That said, detached housing has traditionally been an excellent choice for long-term capital gains, particularly in established suburbs that have ready access to the CBD.

If they have some renovation potential, all the better.

And while existing housing is a safe enough bet for investors, new house-and-land packages as well as vacant lots are enjoying rising popularity at present too – particularly from interstate investors. Government stimulus has played its

The agent reported he had six offers within one week from interstate purchasers.

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Despite this, it is not a bad time to consider investing in entry-level dwellings within the inner-ring suburbs as these traditionally perform well, even during tough times.

Gold CoastNorth Gold Coast The investor market has dropped off due to COVID-19. Agents are reporting that the most probable buyers for most property types are homeowner buyers. Reportedly investors are generally more pessimistic about the short to medium term property market and are mostly playing a wait and see game.

One leading sales agent has reported that it is very difficult to sell properties that have longer term tenancy agreements as the current buyer demographic is homeowners who require more immediate vacancy.

However, the market is currently strong, and properties marketed with sensible vendor expectations are selling very quickly. This applies to family style, single detached dwellings and duplex and townhouse style units. Many sales are showing a slight increase in price points and value. Sales agents are reporting a lack of sales stock saying that many owners are also waiting to see what will happen and not prepared to make a move under uncertain market conditions. It appears that the lack of supply and low interest rates are putting upward pressure on values. Nevertheless, this has also resulted in the volume of sales being lower than expected. This generally reflects the pent-up demand suppressed during the COVID-19 lockdown and reduced stock levels.

Latest sale prices have shown only a slight improvement over the COVID-19 lockdown period

the mid-$500,000s and providing gross yields of around 6.5 per cent to 7.0 per cent.

One example is a dual occupancy in Bluegrass Ct, Hillcrest which went under contract on 24th June providing three-bed, two-bath/one-bath on 458 square metres. The sale reflected a yield of 6.83 per cent.

Another example of multi-tenancy is a block of flats in Redcliffe comprising one x three-bed, one x one-bed and two x two-bed flats on an 800 square metre lot with subdivision/development potential and holding income of $51,480 per year. The property sold for $738,800 to interstate investor. The agent reported he had six offers within one week from interstate purchasers.

How investment property prices continue to trend over the rest of 2020 is, of course, dependant on the way the nation’s economy and health continue to tackle the crisis. There is the potential for an upward swing in detached dwelling prices if we can avoid a 2nd or 3rd wave and the nation’s finances stay resilient.

What investors will continue to watch closely in Brisbane is risks around rental demand and pricing. A decline in rental return coupled with an increase in vacancy rates would not be good for landlords servicing a mortgage. For example, recent anecdotal evidence suggests rental listings within inner-city localities have increased circa 13 per cent over the past few months, which is the result of declining confidence and increased uncertainty and rising unemployment.

part in getting things moving and developers are reporting a notable uptick in monthly vacant land sale rates across many residential estates. That said, some of the larger land subdivisions have started to see rebates/incentives creep back in to entice buyers – perhaps in an attempt to increase their market share.

Attached housing has been reasonably inactive of late.

The unit sector in particular has remained fairly flat, although a general softening in rental returns could see a weakening in the market values if demand for units falls further. Of note, many new units that were being pitched toward investors have now been ‘spec’d up’ to attract owner occupiers and downsizers.

Townhouses (i.e. the other attached housing type) are experiencing limited demand combined with limited supply. Like units, many new townhouses have been ‘spec’d up’ to appeal to owner occupiers and downsizers as well.

Probably of most interest to serious investors at present are residential properties where multiple income streams mitigate risks around vacancies. Things like duplexes, triplexes and flats buildings.

Despite predictions the rental market might ‘bottom out’ with out-of-work tenants unable to pay their rent, this isn’t how things played out. Demand for rentals has remained reasonably stable, so multi-income tenancies are doing well.

For example, dual-occupancy holdings are selling in the Logan area from the high-$400,000s to

Probably of most interest to serious investors at present are residential properties where multiple income streams mitigate risks around vacancies.

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over the past month. Local agents are reporting improved levels of demand, with most buyers seeking property priced under $600,000. Overall, the general sentiment is that there is still an air of confidence in the market across most price brackets. Price levels within the beachside suburbs to the south of Surfers Paradise are holding particularly well, mainly due to a lack of stock on the market. A large majority of sale transactions within the past month appear to have been local owner occupier or local investor purchases, with very few out of town investors.

Whilst investor demand in the Gold Coast central area appears to have softened considerably, some agents have noted that with a spike of COVID-19 cases recently re-emerging in New South Wales and Victoria, buyer enquiry from interstate for holiday style units has marginally picked up but overall demand is still way down. The Gold Coast tourism industry has suffered greatly due to the COVID-19 pandemic and subsequently returns for investment units have been adversely impacted. A few on-site holiday resort managers have reported extremely poor occupancy rates over the recent school holiday break and are hoping for a positive turnaround over the Christmas period. Some recent reports have also suggested that there is some volatility in the rental market with an increase in permanent rentals available and overall unit rental values are beginning to slide. Tenants appear to be willing to shift to another property in order to secure a lower rent and properties

There seems to be a lot of mixed messages with regard to the impact of COVID-19 and prudent purchasers should undertake extensive research in their chosen market prior to buying. Generally speaking, buyers are taking advantage of low interest rates, consolidation of debt and even downsizing to reduce debt. Notwithstanding this comment, there are also a number of buyers who see this as an opportune time to move up the property ladder while money is cheap and if they have maintained stable income throughout the pandemic, banks are often willing to increase debt levels.

One of the largest concerns for the Gold Coast area is potential unemployment post JobKeeper and the slowdown in both the macro and micro economies. These issues are heightened by the Gold Coast’s dependency on tourism and we may see a surge of forced sales on the Gold Coast that will eclipse the tragic 2012 market capitulation period which interestingly took four years to filter through after the Global Financial Crisis broke.

The property market will again shift to a very strong buyer’s market. The Gold Coast’s strongest positive influence is to come from a southern migration as the Gold Coast continues to offer a very desirable and comfortable lifestyle at a relatively affordable price compared to many large cities.

Gold Coast Central After a couple months of subdued activity due to COVID-19, there has seen a slight lift in the central Gold Coast residential property market

for this corridor (Coomera to Eagleby) but do not indicate any significant rise in value over the past 12 months.

Developers are enjoying a resurgence in demand for land and building packages, especially from first home buyers who are rushing to take advantage of the subsidies offered by the government. There are, however, developers who reportedly put their land prices up as soon as the government announced the new $25,000 stimulus. Total subsidies for first home buyers on new properties are reportedly as much as $60,000, however much of this property stock is overpriced in the first place compared to the resale evidence.

Well priced estates such as Gainsborough Greens are selling fast, also assisted by the future construction of a new railway station, which will be within walking distance of the latest stage. Sales in the other estates in Pimpama and Ormeau (east of the M1) are also on the rise but not at the speed that Gainsborough Greens is selling. This could be also due to Gainsborough Greens offering larger sites of 400 to 600 square meters which provide future owners with a reasonable size back yard as well as privacy and sunlight. The lot prices of between $240,000 and $310,000 are also a big advantage over the other estates that sell for the same price but with smaller blocks of less than 400 square metres.

The rural residential market is also strong with evidence that buyers are seeking a lifestyle property from which they can work due to the work from home trend accelerated by the virus.

The rental market is changing with some property managers reporting that long term tenants are shifting between properties trying to secure lower rents or better value for money.

The Gold Coast continues to offer a very desirable and comfortable lifestyle at a relatively affordable price compared to many large cities.

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market as a whole for a short period. However, Queensland has been on the forefront of containing the spread of the virus, actively keeping the borders closed to the remainder of the country until 10 July.

As restrictions ease, recorded cases continue to decline and government stimulus packages (JobKeeper and Homebuilder) continue to roll out, it appears there has been a considerable resurgence of confidence in the market. Agents have reported a high level of interest throughout most areas but in particular beachside suburbs which have historically been sought after. Extremely low stock levels coupled with all-time low interest rates and considerable economic stimulus packages have in most cases seen property values remain stable on the tail end of the pandemic and in some instances value rises have occurred. Moving forward there are some concerns as to how the property market may react once the government stimulus packages are wound back towards the end of the year.

Investors in the Sunshine Coast property market are still active with market sentiment having improved which has in turn instilled confidence in the marketplace. The main driver of this sentiment is the Sunshine Coast lifestyle and the major infrastructure projects across the Coast. With interest rates at an all-time low, investors are looking to property as a way or increasing their returns. Across the Coast, gross yields normally tend to range between four and 15 per cent which reflects the relative risk on investment.

7 Tawarri Crescent, Burleigh Heads Source: realestate.com.au

A number of agents and newspaper articles have reported that there is a surge in demand for acreage type properties away from the hustle and bustle. One of the main reasons for this demand is that more people can work from home. The attraction is the space provided by acreage living and purchasers are now spending more time at home, not just due to the lockdown recently experienced, but also the restriction on travel.

After the opening of the Queensland border there has been a reported surge in demand from southern buyers for Gold Coast and Tweed Coast property, which is anticipated to continue.

Most agents are reporting very limited demand from investors. Rental amounts have generally decreased over the past four months and vacancies have increased, therefore making property less attractive for investors.

Sunshine CoastIn the early stages of 2020, we experienced the escalation of COVID-19, which in turn led to restrictions on social interaction and ultimately nationwide lockdowns and the closure of the state’s borders. As a result, there was a high level of uncertainty about the economy and the property

that have previously been offered for short term accommodation are moving towards the longer term guaranteed income stream that a permanent tenant offers.

Investors who are ready to jump into the market should specifically be looking at the family style detached dwelling, townhouse or duplex unit product option at the moment. Demand for this product is fairly strong and stock levels have been low which has resulted in values remaining stable, and in some cases, we have seen some marginal improvement depending on the location. Given that there are forecasts for a downturn in the local and national economy, investors seeking to buy right now should only consider these options if it will be a long-term investment proposition.

Gold Coast SouthThe residential market of the southern Gold Coast and northern New South Wales region remains solid overall with some strong sales results over the past month. The majority of properties are attracting good levels of enquiry and demand and time on market seems to be averaging three to four weeks. All agents are reporting a shortage of listings and there is a lot less volume of sales compared to 2019. In particular there have been some strong sales results on the Tweed Coast that have been difficult to support based on comparable sales.

Burleigh and Palm Beach have also seen some sales in excess of value levels achieved for comparable properties in the past 12 months, such as 7 Tawarri Crescent, Burleigh Heads which is reportedly under contract for $2.415 million. The property is a good quality new home on a 536 square metre dry block. Located in the Koala Park precinct of Burleigh Heads, this is a new build in close proximity to Tallebudgera Creek and the beach.

4% to 15%Sunshine Coast yield estimates

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best returns from an investor’s perspective. Gross yield on sets of flats range broadly between six and nine per cent in the region, with the majority of flats returning around seven to eight per cent gross. Houses in the region also provide a sound return and scope for capital gain over the long term.

Standard duplexes typically require an initial investment in the mid to high $200,000s and entry level into the residential market in Rockhampton for instance for a two-bedroom home in Rockhampton City, out of flood is around $150,000 with average rents around $220 per week.

A recent sale in Park Avenue of a triplex returning 9.1 per cent gross yield. Source: Core Logic

There are many positive indicators for the residential investor market in 2020.

RockhamptonMonthly COVID-19 update: Over the past month, there has been no noteworthy change to the recent trend we have been experiencing in the local market. We continue to see residential property in the Rockhampton region (including the Capricorn Coast) selling. Well-presented properties continue to be snapped up by purchasers and Rockhampton and the Capricorn Coast are continuing to see an upward shift in prices. Regionally, we have been fortunate to continue with no new COVID-19 cases. If the state as a whole can continue in the coming months without the need to reintroduce any COVID-19 restrictions, there is no reason to expect any changes to our local markets.

Historically, the Rockhampton market has always been heavily influenced by investors, however over recent years, we have seen new investors stop entering our region. This coincided with the downward trend experienced across the mining industry in 2012. Since this time, investor activity has been limited, however 2020 is starting to see some improvement in the investor market.

Drivers for this recent change are considered to be a direct result of a combination of factors, including record low interest rates, affordability, a tightening trend in vacancy rates, increasing weekly rents, opportunity for capital growth and a number of significant infrastructure projects underway where a shortage in the order of 3000 workers has been predicted in the next few years.

Recently the investor activity has been mostly local, however we anticipate nonlocal investor activity will start to improve with some local agents reporting interstate investors already starting to enquire, based purely on rental returns.

Duplexes or sets of flats are likely to provide the

Properties situated within areas underpinned by re-development potential or situated in highly sought-after localities tend to be at the lower end of the yield range. A yield at the higher end of the yield range is typically achieved by units within the main tourist precincts however with high body corporate and management fees, much of these yields can be eroded.

Standard dwellings on the coast typically show a return of four to five per cent which is primarily driven by first time investors. We have seen an increase in interstate investors throughout the Sunshine Coast who have been purchasing and constructing dual occupancy style properties which generally provide a higher yield of up to 6.5 per cent. Slightly higher yields can also be achieved through the hinterland townships with properties comprising three to five flats achieving yields in the seven to eight per cent range. Typically these properties are older with ongoing maintenance and additional management fees required.

In the prestige market we have continued to see a number of investors, however it is difficult to gauge given that there are a number of different drivers in the investment decision. This market is closely related to the southern markets of Sydney, Melbourne and Brisbane. Investors within the segment have typically looked at investing in the Noosa region with a view that their investment may become the future retirement home and principal place of residence.

All in all, the investment market on the Sunshine Coast has been pretty healthy. The good thing is that there are a number of infrastructures projects underway and still in the pipeline that will help with maintaining market sentiment in the area.

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REIQ data indicates that rental vacancy rates have remained within a tight range for an extended period. Investors can expect to achieve minimum rental yields of five per cent per annum gross and above which looks set to continue in the short to medium term.

EmeraldInvestors are very active in Moranbah, Emerald and Blackwater during each coal boom, however currently the activity is limited. We are seeing the highest rents in the past six years, but it appears investors are only interested in multi-unit properties which are returning on average ten per cent gross yield. Some houses in Moranbah are nearing eight per cent gross yield as rents have spiked considerably over the past six months. In most areas, vacancy rates are below two per cent however we keep one eye on coal prices which are low. We wait to see if coal prices will start to affect employment in the region and whether we will come out the other side of COVID-19 and see a strong demand for coal again.

MackayMonthly COVID update - Mackay has continued to fare well economically through the current COVID-19 crisis. The major industries of mining, mining services, infrastructure projects and agriculture have been virtually unaffected. Employment opportunities in the Bowen Basin and mining services has continued to be strong and with the sugar crush about to commence, increased

definitely contributing to the improvement in the sector. Drivers include record low interest rates, affordability, rising rents, tightening vacancy rates (1.4 per cent in July, the lowest since March 2012) and slow and steady capital growth.

Investor activity has come from a good mix of local and non-local purchasers. One small lot estate in Gladstone has a number of new homes being built at the moment, all by interstate investors.

Duplexes or sets of flats are likely to provide the best returns from an investor’s perspective. Gross yields on sets of flats range broadly between six and 12 per cent in the region, with the majority of flats returning around seven to nine per cent gross. Standard duplexes typically require an initial investment of between $150,000 and $300,000. Larger sets of flats of up to a group of four to six flats are also definitely obtainable with a budget somewhere between $300,000 and $550,000.

BundabergMonthly COVID-19 update: Over the past month, there has been no noteworthy change to the local market. Residential property in the Bundaberg region, including the coastal strip, is continuing to sell despite the doom and gloom forecast at the beginning of the pandemic.

Demand has been steady across all areas of the region with no apparent decline in interest. Investors appear to be mostly locals due to the relatively affordability of the area. Demand for new housing appears to be on an upward trend due in part to the unprecedented grants on offer to new homeowners.

Gladstone A short and sweet COVID-19 update this month! Sales activity continues to increase, values are slowly rising and there have been no new COVID-19 cases in the region. All in all, another positive outlook for the month.

Gladstone has always been a hotspot for investor activity. During the mining boom, Gladstone was spruiked from here to kingdom come by project marketers and the like, promising huge returns and capital growth. While those returns were seen for a number of years, the market soon came crashing down as it was always going to. We draw attention to history, where the commencement of large projects within the region have resulted in surges in demand during construction followed by periods of lower demand, resulting in volatility in the residential market. As the market began to fall in 2012, investors started retreating from the market and this eventually turned into a full-scale exodus.

However, after the market bottomed in 2017, we slowly started seeing investors re-enter the market. Activity was still limited as the 4680 postcode had significant lending restrictions in place based on past turmoil. Fast forward to 2020 and investors are definitely back in Gladstone. It’s not quite the hotspot it once was, but various factors are

Investors are very active in Moranbah, Emerald and Blackwater during each coal boom, however currently the activity is limited.

$150,000 - $300,000

$300,000 - $500,000

Duplexes

Flats

Gladstone price range

5.5% to 6.0%Mackay gross yield (houses)

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TownsvilleThe resilience of the Townsville residential market post COVID-19 continues to astound us with increasing sentiment and a noticeable increase in vacant land sales and new home construction following the $25,000 Homebuilder grant.

The investor market for house flippers continues to see good activity, particularly in established suburbs such as Railway Estate, Currajong and Gulliver. The entry level price for this type of investment is in the low $200,000s range.

Agents are reporting that there has been an increase in enquiry from traditional investors from the southern states and anecdotally we are seeing buyer agents acting on behalf of buyers also becoming more active in the market.

The rental market over the past few months has again begun to tighten having been largely unaffected by COVID-19. The number of residential properties advertised for rent on realesate.com.au within the greater Townsville region has reduced considerably from around 850 mid-April 2020 to around 450 in mid-July 2020. During the June 2020 quarter, the trend median house rent stood at $360 per week and the trend median unit rent at $290 per week.

return to some normalcy.

Tourists from mostly within Queensland have visited for the school holidays and provided a valuable cash injection to the local economy. Despite Victoria and New South Wales recording a second wave of infections, regional Queensland appears to be unaffected at this stage. Property values in the area are stable with no noted decline in any property class. There has been a considerable increase in the volume of land purchased as a result of the Homebuilder package which will no doubt sustain the building industry for at least twelve to eighteen months into the future. Developers are now swiftly working on infrastructure for the next stages of developments to provide more land stock before the end of year deadline. An extension to this deadline would be welcome news with many builders having been overwhelmed by the Homebuilder incentive.

Local agents have been reporting steady demand for investor stock which does not appear to have changed since the start of the COVID-19 pandemic. Investors are somewhat constrained at present with low levels of residential stock listed for sale with some hesitant residents choosing to sit tight and stay put rather than list their homes for sale. Some lower priced property in the sub-$300,000 price range is achieving slightly above market prices due to the shortage. Local investors appear to be more prevalent of late, particularly for standard house and land packages. Hervey Bay has very low volumes of available rental stock, particularly for detached houses, which is increasing rents in response to demand. Investors can expect to achieve minimum rental yields of five per cent per annum gross and above which looks set to continue in the short to medium term.

employment in the agricultural sector should begin. With restrictions continuing to ease, more and more businesses affected have been opening up.

The effect of COVID-19 on the residential market has been fairly limited. The market has continued to be strong with local agents reporting increased buyer demand, shorter listing times and general optimism returning. Many local long-term agents have stated they have achieved record sales results over the past month or two, with no signs of the market slowing down.

The rental market in Mackay has been very strong for around the past 12 months, with vacancy rates sitting below two per cent. Growth in employment in the resource sector, large infrastructure projects and the sugar crush, plus the restrictions on travel have been some of the factors leading to this tightening. Rental values have also increased substantially over the past 18 months. All in all, conditions are ideal for investors to re-enter the property market in Mackay.

Gross yields for standard residential dwellings currently sit around 5.5 per cent to six per cent, while we have seen sales of modern two x three-bedroom, two-bathroom duplexes sell for around the $530,000 mark, analysing to a gross yield of 6.9 per cent. Larger, older style flat complexes are showing analysed gross yields of between seven and nine per cent.

With historic low interest rates (which appear set to stay for the medium term) and continued employment opportunities, it is considered to only be a matter of time before investors start returning to the Mackay market.

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New unit construction has been slow over recent years with early signs of a re-emergence of activity in this sector.

The avenues highfields aerial Source: Nearmap

The effects of Covid-19 were felt in March and early April however buyer inquiry appears to have returned to more normalised levels. Toowoomba is not heavily reliant on the tourism sector to sustain its economy and the previous closure of the Queensland border did not have a significant impact on the broader market in the region. Western Queensland businesses did feel the impacts of the loss of the ‘Grey Nomad’ tourism dollar over the normally busy winter travel period. The Darling Downs region is supported by the agricultural sector which has been performing well due to early summer rains.

Limited supply and a low interest rate environment have underpinned values in the higher price brackets and rural residential sectors. The investor market is less buoyant and trading steadily.

New dwelling construction is expected to ramp up over the next six to twelve months on the back of the Government’s stimulus package. This will place pressure on construction costs as the demand for trades and materials increases and workforces tighten. Of concern will be the cost versus value equation in a market where second hand properties begin to compete with an increasing supply of new dwellings.

Overall there are many suburbs throughout Townsville with solid yield investing options available, particularly if not seeking short to medium term capital growth. As yields vary based on demand and supply in the rental market, it is important when buying an investment property to consider property that will appeal to a wide range of potential renters.

Darling Downs/Toowoomba Residential housing markets in Toowoomba and the broader Darling Downs region appear to be relatively stable and are operating within normal market tolerances. The demand for vacant land is booming due to the Federal Government new home construction stimulus package. Estates that had been carrying residual stock over the last two years are now fully sold with Developers reporting unprecedented demand for additional lots.

Estates in fringe suburbs such as Kearneys Spring and Cotswold Hills and satellite suburbs including Highfields, Kleinton, Gowrie Junction and Withcott are basically sold-out which has made it very challenging for first home Builders to enter the market.

Essence estate cotswold hills aerial Source: Nearmap

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Adelaide Throughout the month of July, South Australia remained community transmission free of COVID-19. At the time of writing, one new case has been recorded since 29 June which has been linked to a resident returning from quarantine in Victoria. Even as restrictions ease, the labour market has remained subdued with the South Australian unemployment rate increasing from 7.9 per cent in May to 8.8 per cent in June which is now the highest in the country.

As at 30 June, CoreLogic’s Home Value Index indicated the metropolitan market remained 2.04 per cent up on the same period 12 months ago, however has seen a 0.19 per cent contraction month on month. Historically the South Australian market has lagged behind the east coast markets which have shown signs of decline since late March. Considering the most recent market data and east coast market direction, it appears that the South Australian market could be entering the initial stages of a downward cycle. At this stage the decline has only been slight and will be monitored closely in the short to medium term.

Broadly, national investor activity has been in decline throughout 2020. May data released by the Australian Bureau of Statistics indicates that investor loan commitments nationally are 11.9 per cent down year on year and 15.6 per cent down month on month. The level of uncertainty surrounding COVID-19 has been a major deterrent to investors entering the market.

South Australia

Depending on proximity to the CBD, the investor market has historically been driven by rental returns within the outer ring and capital growth within the middle and inner rings. Gross yields of six to nine per cent are common within the established suburbs in the outer ring. Advertised rents range from $250 to $350 per week with median house prices ranging from high $100,000s to high $300,000s. Representative of typical investor stock is the June sale of 140 Elizabeth Road, Morphett Vale for $240,000. Post settlement this property was immediately let at $350 per week, generating a gross yield of 7.58 per cent.

140 Elizabeth Rd, Morphett Vale Source: realestate.com.au

Popular within the outer ring are multiple occupancy properties, typically comprising former housing trust maisonettes. Providing its purchaser with multiple options was the sale of 4 and 6 Knighton Road, Elizabeth North, which recently

achieved a sale price of $350,000. The property comprised two individually titled four-bedroom maisonettes with a combined land holding of 1,653 square metres. The dwellings had previously been let at $260 per week, suggesting a gross yield of 7.72 per cent.

4 and 6 Knighton Road, Elizabeth North Source: realestate.com.au

Rental returns within the inner and middle rings are eroded as values increase and achievable rentals reach a ceiling. Advertised rents range from $400 per week and cap out at $1,200. Median price levels vary through the inner and middle rings ranging from the mid $400,000s to $1 million plus. The high value to low rental ratio produces gross yields of three to five per cent. Investors are typically seeking out capital growth with holding income being an added bonus. Suburbs which have achieved increased levels of capital growth in the March quarter year on

Gross yields of six to nine per cent are common within the established suburbs in the outer ring.

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unit comprises two bedrooms and one bathroom and is located on the first floor of a two level strata complex. The sale indicates a gross yield of 5.47 per cent.

6/11 Shipsters Road, Kensington Source: realestate.com.au

The South Australian market has historically provided purchasers a more stable option to the larger metropolitan markets around Australia. Investors should have confidence in the South Australian market in the medium to long term, being cushioned from the COVID-19 fallout.

Mount GambierThe investor market in Mount Gambier is currently strong with a mix of both local and out of town investors. Properties in Mount Gambier are generally cheaper compared to say Adelaide or Melbourne. Paired with low interest rates and returns of approximately six to seven per cent, there is a much better return for property.

After speaking with local agents, it is clear that the market in Mount Gambier has not slowed due to the effects of Coronavirus and while it was expected that rental prices would drop due to the increasing supply of short term rentals being listed as long term rentals, this has not deterred investors. Houses have been hitting the market

21 Wakefield St, Kent Town Source: realestate.com.au

4-6 Wakefield Street, Kent Town Source: realestate.com.au

Strata units provide an affordable entry price point for those making their first foray into the market. These properties can be seen as a steppingstone and provide a forced savings style of investment for younger investors. Capital growth can be limited whilst gross yields can be eroded by additional fees and charges associated with strata levies. For a typical 1970’s cream brick strata unit, gross yields fluctuate around five per cent. Selling for $261,000 and let at $275 per week is the recent transaction of 6/11 Shipsters Road, Kensington. The

year include West Lakes Shores (25.41 per cent), Colonel Light Gardens (15.41 per cent), Athelstone (13.89 per cent) and Flinders Park (5.34 per cent). Capitalising on the strong market activity within West Lakes Shores were the vendors of 24 McDonald Grove who purchased the property in August 2018 for $900,000. The property was cosmetically renovated and sold for $1.105 million in December 2019.

24 McDonald Gr, West Lakes Shores Source: realestate.com.au

Higher density flat dwellings are popular with sophisticated investors given the multiple income streams and entry price point. The inner eastern suburb of Kent Town has seen two significant multi occupancy transactions in the past 12 months, being 1-9/4-6 Wakefield Street which achieved a sale price of $2.325 million and 1-10/21 Wakefield Street which achieved a sale price of $2.62 million. These properties comprise nine and ten units respectively across two levels of multiple accommodation. The sale of 1-9/4-6 Wakefield Street was advertised with a gross rental of $130,000 suggesting a yield of 5.6 per cent.

Higher density flat dwellings are popular with sophisticated investors given the multiple income streams and entry price point.

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13 Schinkel Street, Mount Gambier Source: CoreLogic

It is expected that the investment market will remain strong within Mount Gambier for quite some time. With low interest rates, it is more beneficial for an investor to invest in property and achieve a good return for good value, rather than keep their money in the bank.

WarrnamboolInvestor activity in Warrnambool is currently strong and is forecast to stay strong into the long term. Having been crowned Australia’s most liveable region by Ipsos’s annual Life in Metropolitan and Regional Australia report and offering affordable entry into the investment space, especially when compared to other major regional centres, Warrnambool has great prospects moving forward.

Warrnambool provides a bevy of potential investment opportunities. Opportunities range from large scale land subdivisions, city infill, renovate and flip, short stay accommodation as well as the relatively affordable new land and house depreciation path. While larger scale development and investment remains dominated by out of town money, the overall investment landscape is still in favour of the local.

achieved a rental of $340 per week or a gross yield of 6.8 per cent.

3/20 O’Leary Road - $258,000 Source: CoreLogic

In recent years the South Australian Housing Trust has also been selling off their unwanted Commission housing. Typically these are older stone dwellings constructed in the 1950s and 1960s offering three bedrooms, lounge, bathroom and laundry area. These Commission homes are typically good value and show a good return. A semi-detached three-bedroom duplex can be purchased for $100,000 to $130,000, with an achievable rental for these dwellings being around $190 to $200 per week. This provides a gross yield of approximately ten per cent. The capital growth would not necessarily be good, and the quality of tenant may also be an issue, but the return is pretty competitive. The property below sold for $109,000 and achieves a rental of $195 per week. This is a yield of 9.3 per cent.

and some are receiving offers within 48 hours, often at the asking price or higher, with many going to the highest and best offer. Investors are generally after houses that present well and are low maintenance, within the price range of $200,000 to $350,000. The return for anything above this will likely not be as strong.

The government’s incentive to build has definitely spurred the market, with over 20 land sales in the popular Springview Drive division within the past couple of weeks, however this hasn’t been a huge benefit to investors as they cannot simply build and rent these houses out straight away on completion of the build.

Within the Mount Gambier region, typical investors tend to invest in a mixture of units and detached houses, which are likely to be in the $150,000 to $250,000 price range. For depreciation benefits they also invest in new houses, ranging from $250,000 to $350,000. A division popular with investors in Mount Gambier is the O’Leary Road division. An example of a recent sale within the division is below. This is a small three-bedroom, one-bathroom dwelling with a single garage under the main roof, on an allotment of approximately 450 square metres. This property previously

$150,000 to $250,000

$250,000 to $350,000

Home & unit buy in price range

Established

New

Mount Gambier

Within the Mount Gambier region, typical investors tend to invest in a mixture of units and detached houses, which are likely to be in the $150,000 to $250,000 price range.

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Most recently, Warrnambool has seen a strong investment drive for the acquisition of larger allotments vacant or featuring older, low quality dwellings. A prime example of this is the centrally located 53E Lava Street, Warrnambool ($442,500 on 13 December 2019).

53E Lava Street, Warrnambool Source: realestate.com.au

Set on approximately 888 square metres and comprising two titles, this property also featured an older, conite clad, two-bedroom dwelling providing a very basic standard of accommodation.

Also representative of this demand is 212 Merri Street, Warrnambool ($400,000 on 18 May 2020). This property is situated opposite the Warrnambool train station and features a two-bedroom dwelling of average condition set on an allotment of approximately 1,541 square metres.

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PerthThe Western Australian government has maintained that strong border restrictions will continue as long as required, amid news that phase five of the state’s easing of COVID-19 restrictions has been delayed until 1 August. The state’s Police Commissioner has also suggested stopping all planes from Victoria from entering the state in order to reduce the risk of new cases. On 19 July, the Western Derby was due to host a sell-out crowd of 60,000 at Optus Stadium, however as phase 5 was postponed, there was a limit of 30,000 in attendance as a precaution. As of 13 July, the state had 22 active cases, all of which were in hotel quarantine. Western Australia also had 604 people out of the total 635 confirmed cases fully recover from the virus.

The Real Estate Institute of Western Australia (REIWA) confirmed that June recorded the highest amount of sales recorded in a month in Perth since 2015, with transactions increasing 55.1 per cent compared to May and also 45 per cent higher compared to June 2019. This was supported mainly by the 289 per cent increase in land sales for the month with 1471 sales recorded, as competition for land increased in line with government incentives. Over the first week of July, sales activity within Perth increased by 35 per cent from the previous week, with a reported 1318 transactions recorded during that period. These figures are vastly different to figures recorded at the end of March, which recorded just 426 transactions.

The Perth median house price fell slightly in the June 2020 quarter to $475,000, compared to

the $479,000 price recorded over the March quarter. The Perth median house price for the June 2019 quarter was $489,000. There were 10,407 properties listed for sale at the end of the first week of July, which was a 17 per cent decrease from listed stock at the end of March and a 29 per cent fall in listed stock from the same period last year.

REIWA reported that there were currently 3963 properties available for rent at the end of the first week of July, which was a 27 per cent decrease from the end of March and 47 per cent decline from the same period in July last year. Perth’s median rental price for June was listed at $350 per week which was a seven per cent decrease from the March 2020 quarter and a three per cent fall from the same time last year, which indicates that rents within the state have remained stable throughout the COVID-19 pandemic with declining vacancy rates and the ban on increasing rents for established properties still being active.

The vacancy rate in Greater Perth has fallen to a mere 2.2 per cent with REIWA President Damian Collins expecting further decreases due to plummeting rental listings. The vacancy rate has been in steady decline since early in 2017 when it peaked at just above seven per cent. Western Australia hasn’t seen vacancy rates sub-two per cent since the end of the mining boom in 2012 and 2013.

In general, residential investment around Perth has been minimal over the past year, with specific property types and locations seeing small bursts of activity, however this doesn’t mean that investment isn’t viable. In fact, there are plenty of opportunities for a variety of reasons. An example of this is older units in sought after locations. Suburbs such as Maylands and Wembley can offer good yields for the entry-level investor.

Maylands is situated four kilometres north-east of the Perth CBD. REIWA reports the unit median at $290,000 for the March 2020 quarter, falling eight per cent since the year previous. The capital growth prospects aren’t great for most 1960’s to 1980’s apartments and flats, however for entry-level product in the low $100,000s, yields can be impressive.

Caledonian Avenue, Maylands Source: CoreLogic, 2019

Western AustraliaThe Real Estate Institute of Western Australia (REIWA) confirmed that June recorded the highest amount of sales recorded in a month in Perth since 2015.

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Salvado Street, Cottesloe Source: CoreLogic, 2017

This property was purchased back in late 2016 for $3.6 million. The circa 1962 dwelling comprises four bedrooms, two bathrooms and a double garage on a 911 square metre allotment. As you can see from Figure 8, the property is well located and captures views of South Cottesloe Beach and the Indian Ocean. The purchasers rented it out almost immediately and with its R20 zoning, the property has subdivision potential for two lots or would be a prime candidate for a high-spec new development.

Griver Street, Cottesloe Source: CoreLogic, 2019

Herdsman Parade, Wembley Source: CoreLogic, 2019

This circa 1977 built unit sold for $180,000 in May 2019 and comprises two bedrooms, one bathroom and one car space with 50 square metres of living area. It was listed for rent in June 2020 for $250 showing a notional yield of 7.2 per cent.

Switching to a different type of profile, wealthy upgrade buyers have been spotting potential in good locations close to the CBD. Suburbs such as Cottesloe and South Perth present opportunity for prudent home-searchers who have the equity to hold two mortgages temporarily. They choose their preferred location, wait for the right property to come to market, make the purchase and then rent it out until the ideal time to renovate or redevelop.

Salvado Street, Cottesloe Source: CoreLogic, 2017

This 44 square metre, 1970’s unit on Caledonian Avenue is situated close to shops and Maylands train station, with great access to Guilford Road. It sold in December 2019 for $110,000 after 10 days on the market. The property comprises one bedroom, one bathroom and is situated on the top floor of a 52 unit walk-up complex. It was recently listed for rent at $200 per week, showing a notional gross yield of 9.5 per cent.

Kennedy Street, Maylands Source: Joyce Property Investments, 2020

For comparison, this 2020 built unit with 48 square metres of living area comprises one bedroom and one bathroom situated on the first floor of a 123 unit complex. It sold in February 2020 for $320,000 and has recently been listed for rent at $340 per week, showing a notional yield of 5.5 per cent. Prospects for capital growth in this newly built unit are unfortunately similar to the 1970’s unit on Caledonian Avenue as chronic oversupply of both new and old apartments hinders opportunity for capital gains, however both units have appeal – one for gross return and the other for depreciation benefits.

Suburbs such as Cottesloe and South Perth present opportunity for prudent home-searchers who have the equity to hold two mortgages temporarily.

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Bunya Green, Byford Source: CoreLogic, 2019

This property at Bunya Green, Byford sold for $365,000 in February 2020. The circa 2004 dwelling comprises four bedrooms, two bathrooms and a double garage with 155 square metres of living area on a 450 square metre allotment. It was advertised for rent in June at $350 per week showing a notional yield of five per cent.

Where returns do start to improve is in regional Western Australia. Areas such as Kalgoorlie-Boulder, Port Hedland and Karratha can see yields anywhere between five and 15 per cent and beyond.

Our valuers are reporting that the Kalgoorlie market has been strong throughout 2020. Stock levels are the lowest they have been in a long time and there is plenty of demand. This hasn’t yet resulted in price increases or any influx of investors, however vacancy rates are on par with or even lower than in Perth and this rental demand could be enticing to bring investors back to the market. The majority of sales that our valuers are seeing have been well-presented, green-title dwellings for owner-occupiers.

Songlark Court, Baldivis Source: Mallison Real Estate, 2019

Yields in oversupplied areas such as Baldivis, Ellenbrook and Byford are reasonable, but not amazing. The Greater Perth average yield for the March 2020 quarter was 4.1 per cent for houses, and 4.7 per cent for units. This property at Songlark Court, Baldivis sold for $425,000 in 2016 and was recently listed for rent at $370 per week showing a notional yield of 4.5 per cent, however values in Baldivis have fallen an average of 16 per cent since the last sale and with oversupply still prevalent and building incentives rampant, there isn’t much opportunity for capital gains.

Bunya Green, Byford Source: CoreLogic, 2019

Griver Street, Cottesloe Source: CoreLogic, 2016

This Griver Street property sold in April 2016 for $1.9 million after a 24 day marketing campaign. The circa 1960 dwelling comprises three bedrooms, two bathrooms and a double carport on a 969 square metre allotment. The property has been subject to a lease since purchase at $600 per week and could benefit from a little TLC, so a renovation could bring it back to its former glory, however it’s ripe for redevelopment with a luxury residence.

On the outskirts of Perth, investment activity has been reasonably subdued. The Coronavirus pandemic has unsettled many potential investors and consumer sentiment has fallen off a cliff, decreasing from 93.7 points to 87.9 points in the Westpac-Melbourne Institute Index of Consumer Sentiment between June and July. This being said, the difference from state to state could be fairly dramatic and with Western Australia’s current climate of affordability, it is still an attractive time to buy if you can find the right property at the right price.

The Coronavirus pandemic has unsettled many potential investors and consumer sentiment has fallen off a cliff, decreasing from 93.7 points to 87.9 points.

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This green-title Baynton property was sold for $365,000 in 2018 after 110 days on the market. The circa 2005 dwelling comprises four bedrooms, two bathrooms and a double garage on a 642 square metre allotment. The property was listed for rent at $1000 per week showing a notional yield of 14.3 per cent – quite the return!

South Hedland has been showing consistent returns of between 10 and 15 per cent in 2020. This Sturt Place property sold for $190,000 in May 2020. The circa 1975 dwelling comprises four bedrooms, one bathroom and a double carport on a 519 square metre allotment. It was listed for rent in July for $500 per week showing a notional yield of 13.7 per cent.

Gascoyne Court, South Hedland Source: CoreLogic, 2020

Gascoyne Court, South Hedland Source: CoreLogic, 2020

Galbraith Road, Pegs Creek Source: CoreLogic, 2020

This circa 2014-built unit was sold in 2019 for $192,000 after a single day on the market. The Pegs Creek property comprises two bedrooms, one bathroom and a single undercover car space with 51 square metres of living area. It has been listed for rent at $480 per week for a notional yield of 13 per cent.

Buchanan Circuit, Baynton Source: CoreLogic, 2018

Buchanan Circuit, Baynton Source: CoreLogic, 2018

Morley Way, South Kalgoorlie Source: CoreLogic, 2019

This duplex unit at Morley Way, South Kalgoorlie sold for $200,000 in September 2018 after a very lengthy marketing campaign. The property was originally advertised in September 2014 for $289,000. The price was reduced multiple times however the campaign was abandoned in January 2017 after 859 days on market. It was then relisted in July 2017 and took another 435 days to finally sell. The property comprises three bedrooms, one bathroom and single carport with 77 square metres of living area. The unit was listed for rent in June 2020 for $320 per week, showing a notional yield of 8.3 per cent.

Moving up to the Pilbarra, Karratha has been experiencing seemingly exponential growth over the past two years. Owner-occupiers and investors have stuck their hands in the honeypot and most have come off with strong returns. The median house price in Karratha increased five per cent over the March 2020 quarter to $420,000, increasing 23.5 per cent since 2019. The unit median has skyrocketed by 46.2 per cent over the past year, settling at $193,750 for the March quarter. The median dwelling rent decreased slightly over the March quarter to $550, however it has grown by 29.4 per cent year-on-year.

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This property sold for $370,000 in April 2020 after two days on the market. The circa 1997 dwelling comprises four bedrooms, two bathrooms with a double carport on a 701 square metre allotment. The property also has a pool and a shed which has been converted to a one bedroom, one-bathroom granny flat. It has recently been advertised for rent at $800 per week showing a notional yield of 11.2 per cent.

Travelling to the southern side of Western Australia, the South-West region has been inundated with short-stay accommodation demand as border restrictions have prevented any interstate or overseas travel. This has been bolstered by the recent school holidays as flocks of residents from Perth and wider parts of the state head south for a holiday. This has played into the investor market as there has been a lot of building activity within the Margaret River region from principal homeowners constructing a studio or ancillary accommodation to rent on an AirBnB basis. Homeowners have been investing in their principal residence and the renovation stimulus is helping that.

Overall though, there hasn’t been an overabundance of investors in the South-West recently. The tightening of credit surrounding investors did slow down that segment of the market in the lead up to COVID-19 and there has been no real change in the purchaser profile since the pandemic hit. There doesn’t seem to be a fear of the second wave at the moment as market activity remains strong amongst owner-occupiers. Hopefully our Coronavirus statistics remain low, as we have seen it can all change in a matter of days.

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DarwinFirstly, a brief update with how the COVID-19 pandemic is impacting the Norther Territory’s property market over the previous month. As you might be aware, the NT has been less affected compared to the southern states, mainly due to the minimal amount of cases and zero community transmission. However, there is no doubt the local economy has suffered considerably, with minimal tourism from interstate and no foreign tourists providing that necessary tourism cash injection over the dry season.

Despite the poor economic conditions, recent market sentiment in the residential sector has actually shown a positive direction, with agents advising strong interest for potential purchasers coupled with a lack of supply for new stock. The volume of sales appears to be increasing, although pricing remains static. This can be attributed to several factors, one being Darwin is considered quite close if not at the bottom of the property price cycle. Additionally, locals looking to possibly travel over-seas or relocate interstate have decided to settle down and purchase a home in Darwin. Darwin has always been considered a transient city, however due to the recent pandemic we suggest in the short term any transitioning to other locations has been put on hold. Whether this strong market activity is sustained and translates to upward capital growth however remains to be seen but is a good indicator for positive signs heading into the back end of 2020.

Looking to our main focus of investor activity, Darwin has always shown strong rental returns and therefore has been a popular location for local investors to watch their money grow. A consistent downturn over the past four years has led to what many property professionals are considering the bottom of the market and offers potential purchasers not only strong returns but the possibility of capital growth.

Popular investment options can range between both units and dwellings; however, units are the most affordable options for those looking to purchase their first investment for obvious reasons. The Darwin CBD region has the largest choice of units in the area, with a one-bedroom unit on the fringe of the Darwin CBD selling in March of this year for $90,000. To give a strong indication of the current economic situation, this same unit sold for $340,000 in 2013 indicating a massive value drop of 74 per cent. A unit of this configuration would rent for approximately $250 a week, equating to a gross yield of 14.4 per cent. Whilst this yield may be seem quite high, a potential investor must also take into account expenses such as the body corporate fees which would significantly impact the returns.

Established dwellings make up the majority of the Darwin property market and can be found in every

Northern Territory

area except the Darwin CBD. The median price for this type of property ranges from $650,000 in the premium Inner Darwin segment to $447,000 in the Northern Suburbs. Gross rental yields for these segments sit at approximately 4.2% to 4.7% respectively. (REINT Quarterly: March 2020). This is contrasted with an average of 2.4% for the average house in Sydney. ( SQM Research: July 2020). The bulk of this market is made up with local investors, with Darwin mainly missing out on the large scale international investment other capital cities have seen in the past decade.

With regards to newer dwellings, the classic investor stock in Darwin has been driven by Defence Housing Australia property stock which is still being sold with relative consistency today. These properties are sold with a 9 year plus 3 year option, and are generally have a standard semi-modern fit-out. They attract rental yields of approximately 5% and include a ratchet clause not allowing the rent to drop from the original amount. The type of property would offer a solid option for investors over a longer period.

Looking to the short and medium term, Darwin still provides opportunities for investors to put their money in property. Whilst capital growth may be some time in the future, recent signs of strong purchasing activity are positive signs. How

Darwin has always shown strong rental returns and therefore has been a popular location for local investors to watch their money grow.

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These figures are supported by statistics released by the REINT for the March 2020 quarter, revealing the average yield on a three-bedroom dwelling in Alice Springs to be 5.8 per cent and 6.6 per cent for units and townhouses. Vacancy rates are historically low in Alice Springs, generally fluctuating between three and five per cent.

All in all, Alice Springs has a strong investor market, with more than 50 per cent of homes owned by investors. Many of these properties are tightly held given the good rental returns and lack of incentive to sell, taking into consideration the recent history of minimal (or negative) capital gains. The lack of capital gains and perhaps just the sheer isolation of the place are seen as the major factors why investors with no connection to Central Australia are perhaps reluctant to view it as a serious option for investing in property here.

Territory figure of 50.3 per cent and significantly higher than the Australia-wide figure of 30.9 per cent. This is indicative of a fairly transient population, who have no desire to own property in the area, preferring the flexibility of renting. From the writer’s observations, it would appear that the typical profile of an investor in the Alice Springs market is a single or couple who either currently live here or have at some stage lived in Central Australia. Despite healthy rental returns, where in excess of six per cent is not unusual, it seems Alice Springs is not an attractive location for investors who have no connection with the area. Certainly the lack of capital growth in the market over recent years does remove some of the gloss of getting good rental returns.

On the face of it, rents paid in Alice Springs are considered higher than comparably-sized towns in the eastern states, commensurate with the higher than average market value of dwellings here.

As an example, a late 1990’s built, unrenovated two-bedroom, one-bathroom unit in a complex of 12 has recently gone under contract for $375,000 with a sitting tenant in place paying $440 per week rent on a six month lease. This is a well situated unit in a desirable area of town, within close proximity to the CBD, schools and entertainment venues. It’s showing a gross return of 6.1 per cent. Looking at stand alone dwellings, an average condition three-bedroom, one-bathroom home that was built in the 1980s to 1990s is fetching low $400,000s in the current market and can easily be rented for $500 per week, yielding around six per cent minimum for the investor.

the COVID-19 pandemic impacts the market in the medium to long term however remains to be seen.

Median unit price gross yield

Inner-Darwin $650,000 4.2%

Northern suburbs $447,000 4.7%

Alice SpringsThe Northern Territory continues to get a favourable run as far as avoiding outbreaks of COVID-19 infections is concerned and this is no doubt due in part to the low population density making social distancing much easier. As a result, the local property market in Central Australia has not been impacted to any great extent by Coronavirus.

Local real estate agents report good levels of activity from both buyers and sellers and NT Government statistics indicate that transaction numbers have remained steady, with 55 house sales and 26-unit sales completed in the quarter to June 2020. Median prices for both houses and units have shown an uplift in the recently completed quarter, giving cause for some level of optimism in the local market. Although a reasonable percentage of individuals and businesses rely on tourism for their livelihoods, the local economy is reasonably diverse. We will watch with interest however, the predicted cliff that looms with the phasing out of federal government aid packages such as JobKeeper and JobSeeker subsidies and free childcare.

Data from the 2016 Census reveals that 52.6 per cent of all occupied dwellings in Alice Springs are rented, which is slightly above the Northern

All in all, Alice Springs has a strong investor market, with more than 50 per cent of homes owned by investors.

Alice Springs sale numbers

June 2020 Quarter

Houses: 55Units: 26

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CanberraFirst – the COVID-19 update.

The pandemic has affected all aspects of our life and the housing market is no different although Canberra appears to have weathered the storm better than most. At this stage we are approximately three months in and we don’t appear to have seen a significant impact on the housing market although only a fool would try to predict the long-term effect on both the local and national economy.

Of course, restrictions are in place which hampers marketing and open homes, but demand remains high and most agents are stating that there is a limited number of housing stock coming onto the market and demand is outstripping supply. There are many factors at play here, but most people would claim this is due to the large reliance on Public Sector employment and the relative job security this offers.

The latest figures from Core Logic show that average Canberra house prices rose 0.1 per cent last month (June) which is a contrast with Sydney and Melbourne which have seen a 1.1 per cent decline over the same period. Only Darwin and Hobart have performed better with a monthly increase of 0.3 per cent reported. However, Canberra proudly sits third on the ladder when it comes to annual house price increases (6.3 per cent) behind both Sydney (13.3 per cent) and Melbourne (10.2 per cent).

And onto the investor’s playbook. The investment market remains buoyant with investors attracted

to Canberra’s steady property market rather than the volatility of the markets in other capital cities. Recent research shows that rental vacancy rates are low revealing that the rental property will be on the market for an average of 23 days which is only beaten by Hobart (17 days) and far better than Sydney (35 days), Perth (42 days) and Darwin (52 days).

The Canberra suburbs which appear to be the most popular for rentals are in the North side of Canberra with both Bruce and Belconnen heading the list probably due to the affordability of units in these areas and close proximity of both Civic and the University of Canberra. It is not uncommon to see Rental Yields for units and townhouses in some of these areas as high as six to seven per cent. On the flip side of this, with no end in sight of the continual construction of units close by, capital growth is virtually zero.

Areas where the Rental Yields are the lowest also coincide with the longest average time spent on

the rental market and these include Forrest (36.5 days), Deakin (30 days), Red Hill (30.4 days) and Yarralumla (30.7 days). Median house prices in these inner south areas range from $1.375 million (Deakin) to $2.8 million (Forrest). Yields here are in the region of three-to-four per cent but capital growth is expected to be steady.

Dwellings, in other more affordable areas of Canberra suburbia, including Weston Creek in the South and Giralang in the North offer yields in the region of four to five per cent.

The main driving forces for the Canberra rental market are the transient population particularly people working on short to medium term Government or Defence contracts who need accommodation whilst they remain in the City. Students also drive demand although it will be interesting to see how Covid – 19 will affect this sector of the market over the coming months.

According to the latest CoreLogic figures, the gross rental yield for houses in Canberra is 4.3 per cent, while in Sydney it’s 2.7 per cent and Melbourne is 2.8 per cent. It is therefore clear why Canberra is now coming on to Investors radars.

Month in ReviewAugust 2020Australian Capital Territory

The investment market remains buoyant with investors attracted to Canberra’s steady property market rather than the volatility of the markets in other capital cities.

Median house price

Deakin

$1.375 millionForrest

$2.8 million

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HobartIn general terms, the Hobart residential market has remained stable through these uncertain times allowing local residents the ability to purchase their first home without interstate competition. In saying that, there are still many properties receiving multiple offers.

The price point for multiple offers appears to be in the $400,000 to $600,000 range.

Local real estate agents have indicated there is a plethora of interstate purchasers waiting for the Tasmanian border restrictions to be lifted to purchase residential property for short to medium-term investment with the option to move to the Island State later on down the track.

The investor market seems to have slowed somewhat, due to reduced activity in the rental market with reducing demand for rentals and a lower return on investment. This is primarily due to the Premier extending the closure of the borders which was initially from 24 July for an additional seven days (at the time of preparing this review). Hobart is highly dependent on the tourism and hospitality industry and the international student market which has suffered significantly in the past three months.

The restrictions may be extended for in excess of an additional two to three weeks, which seems likely given the situation in Victoria.

Established dwellings with the potential to subdivide are still popular choices with developers as vacant land prices continue to increase with the

reintroduction of the First Home Builders Grant. The federal government’s additional contribution of $25,000 for new home construction will further fuel demand for vacant land, therefore reducing supply and putting positive price pressures on any available stock.

Generally, first home buyers are targeting the more affordable areas such as Rokeby, Oakdowns, Brighton and Austins Ferry to purchase a vacant allotment and build their first home. Prices are creeping up towards the $250,000 mark for blocks of 650 to 750 square metres.

When the borders are reopened and the hospitality and tourism industry goes back to some sort of normal, along with international students being allowed to resume studies, the short to medium term is predicted to maintain a stable level.

Rentals in areas such as Sandy Bay (which is highly dependent on student accommodation) has suffered the most on a broad scale due to the lack of demand.

All in all, the Hobart locality and surrounds by all accounts seems to be a safe place to invest for the time being, but don’t expect the market to rise like it has in the past two to three years. The market is predicted to be stable.

TasmaniaThe investor market seems to have slowed somewhat, due to reduced activity in the rental market with reducing demand for rentals and a lower return on investment.

RuralAugust 2020

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MilduraFarmer confidence levels are remaining relatively high, even though the rest of the economy is feeling the effects of Covid related uncertainty. There are still some rural sales occurring, and there does not appear to be any initial signs of any reduction in value.

However, agents are reporting that the tighter border restrictions are limiting the ability of corporate buyers to inspect and do their due diligence. While the internet can provide a good overall sense of a property, buyers still want to ‘kick the dirt’. We are aware of at least one case where this inability to cross borders is holding up a sale negotiation.

This restriction is exacerbated when international buyers are involved, and it is currently difficult to see how any international travel will be possible in the next 18 months.

Meanwhile the reduction in the Foreign Investment Review Board (FIRB) threshold down to $0 caught many by surprise. There is a significant cost and also time delays involved with navigating FIRB requirements, and this cost becomes more significant as the property value reduces. We are also aware of a one case where the change has delayed a sale.

Whilst we are aware of a number of sales which have been negotiated in the ‘Covid-19’ period across a number of industries, we are not at liberty to disclose finite details as yet until such sales are finalised and settled. A table grape sale in the Robinvale area, a small citrus orchard in the Nangiloc area and a dried fruit property within the Mildura Irrigation area suggest that value levels have remained firm at pre-Covid levels. We are also aware of a large dryland cropping holding which

has transacted (not settled) to the north-east of Mildura in New south Wales which will show levels slightly firmer than pre-Covid values.

Darling DownsDespite drier conditions, the rural property markets across southern and south-western Queensland continue to throw up market leading sales. As we have reported in recent months, there is an increase in property listings with the pent-up demand for both farming and grazing holdings still driving value growth.

It is expected that as the pool of active buyers reduces with increasing supply, values may begin to stabilise. The buyer profiles range from adjoining and nearby owners and private farming companies to interstate sheep and cattle graziers seeking to diversify their exposure to weather patterns.

Properties that provide good fencing and water improvements are keenly sought-after as are farming holdings with soft Brigalow/Belah soils.

Recent sales include “Wallamba” at Westmar which is reported as under contract for $9.5 million for a 2801.64 hectare grazing holding with 38.5 hectare under pivot, 156 hectare of Leucaena flood irrigation and 1,199 megalites of water allocations. “Mt Lonsdale” at Mungallala sold for $8.5 million and comprises an 8146 ha grazing holding. “Welltown” via Goondiwindi recently sold for $31.5 million to a private farming company from a nearby district.

Each of these sales reflect strong land values and reinforce the strength of the market despite broader economic uncertainty.

North and North West QldNorth and North West Queensland grazing property values continue to push through to new levels. All grazing property market districts are now equal to or well above the previous cycle peak in 2008/09.

There has been a lot happening particularly in the Charters Towers/Greenvale area in recent years. This is typically a small to mid-scale forest breeding property market segment. This market segment pushed through the historic peak in the last 18 to 24 months.

Of all the grazing property market segments in the region, the downs country to the south of Hughenden to Cloncurry equaled the 2008/09 peak type value rates in the last 3 to 6 months.

In general, the market is trading at a factor of 1.5 times the value rates of the peak of the last cycle in 2008/09.

The recovery phases of the general market cycle are indicating a factor of 2.2 times since the bottom of the cycle in say 2012 through to about 2014/16. (Remember, these are blended factors across the market spectrum)

The following graph shows the various market segments across the north. This graph maps out the top and bottom hectare rate ranges for each market segment at each phase of the property market cycle to date.

Despite drier conditions, the rural property markets across southern and south-western Queensland continue to throw up market leading sales.

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$6000 per beast AE. It showed around 40 per cent increase in value from the previous sale in 2017, although the previous sale was considered a little low at the time. The current buyer is a larger scale local grazier from the Atherton Tablelands seeking a larger scale grower block.

SugarMSF Sugar is currently in the process of selling down is Queensland sugar cane farm assets and the sale of 247 Silkwood Japoon Road, Silkwood represents one of the most recent transactions. The sale price was $3.1 million inclusive of the current crop and an extensive inventory of machinery. The sale analysed to near $11,000 per developed cane hectare excluding structures for about 165 hectares of cane land. This level of value represents a slight reduction from what the property previously sold for in 2012. The current purchaser is a cane farming family based in north Queensland that is looking to expand.

Cane farm values in localities close to Cairns are running against the trend of softening farm values in other north Queensland growing districts. A small cane farm at Aloomba is currently under contract for around $30,000 per developed cane hectare ex-structures. This represents a near 20 per cent increase from established values of three to five years ago. The purchaser was an existing local cane farmer and cane harvesting contractor seeking to expand. Markets in localities within 30 minutes of Cairns City are considered to be seller’s markets, where demand far exceeds supply. Farms in these localities are tightly held and recent sales indicate that values have no correlation with world sugar price trends.

Bananas The market for banana land in Tully and surrounding localities is considered to be a

Far North QueenslandGrazing Resales of grazing properties on the Atherton Tablelands continue to be a market highlight in far north Queensland. The recent sale of a 67-hectare property with an irrigation licence is a good example. The property previously sold for $900,000 in 2015 and is now under contract for $1.35 million after capital expenditure of about $50,000 on fencing infrastructure and other minor land development. This represents a 30 per cent increase over five years. Interesting to note that both parties involved in the 2015 transaction were local farmers. The current buyer is Queensland based however he is purchasing for rural lifestyle purposes.

The sale of ‘Wyvruri’ at Bramston Beach south of Cairns is nearing settlement for near $5.6 million. It comprises a good quality breeder block of 529 developed hectares on mixed coastal flats and red hillslopes country with a reported carrying capacity of 600 breeders. The sale analysed to $7500 per developed hectare ex-structures or about

At the far right is the blended market cycle showing the peak of the last cycle, bottom of market cycle and the current market condition.

The downs country ranges and their respective dynamics are not surprising. The downs country to the north of the Hughenden to Cloncurry line is outpacing the growth profile of the previous peak.

The major change lies in the better quality or better located (top end of the range) Small to Mid-Scale forest breeding property market segment. This is reflective of the Charters Towers/Greenvale sales activity. The top of the range hectare rate is at about double what it was at the last peak.

Values are in unprecedented territory. There are a number of prudent local Graziers’ who are ready to buy reasonable quality breeding stations at present. Not every purchaser is going to pay silly money though. In some instances, purchasers are drawing a line in the soil as to what they are willing to offer. It’s up to the vendor to take the offers now or play for the higher game.

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and make it over FIRB hurdles.

A notable sale of note was the 42,390 hectare “King River” property which exchanged in late June for $8.75 million after around two years of fairly solid marketing. The purchaser was a large-scale mango grower and pastoralist from the district. This mixed commercial hay farming and cattle growing/trading enterprise 40 kilometres south east of Katherine has good frontage to the Stuart Highway and permanent holes along the King River which runs through the property. Reliable stock water from the Jinducken and Tindal Aquifers however limited irrigation development potential. Whilst around 30 per cent of the property is Freehold, the balance is Perpetual Crown Lease (purpose: mixed farming, livestock production, cropping and horticulture). A bit over 1400 hectares has been cleared at various stages over the last decade and the majority of the cleared country has been improved for fodder/hay production. This is a reasonably solid sale showing around $2700 per hectare for the cleared and improved dryland country and around $1800/AE for around 250 square kilometres of timbered grazing country.

In other news the NT Government has released a report on developing the Gunn Point Peninsula around an hour’s drive east of Darwin.

Gunn Point Development AreaAn extensive two-year study of water, soil and biodiversity surveys of the area concluded that of the 71,300 hectares investigated (in reportedly the most comprehensive biophysical resource assessment ever undertaken in the NT) approximately 33,000 hectares has moderate to good potential for general development including dryland agriculture and forestry. The report also indicated that of the 19,000 hectares potentially suitable for irrigation, a sustainable groundwater

vineyards that continue to work through the short term pressures created by the COVID 19’s shut down of global high end restaurants and the high value bottled wine generally consumed when out to dinner. Conversely, more low-end wine is being consumed at home and sold online or at bottle shops during times of restrictions. These factors, along with smoke taint across many of Australia’s other major wine regions from this 2020 harvest continue to play on market participants minds and impact fruit pricing and are likely to start to be factored into property market pricing over the next twelve months.

On the FIRB front, the recent $40.4 million-dollar purchase of ASX listed Beston’s Global Foods dairy assets near Mount Gambier has recently been given the green light by FIRB following the purchaser ‘Aurora Dairys’ being largely funded by a Canadian Pension Fund. The FIRB approval has now moved the sale to unconditional terms and will see the assets settle in August 2020. The sale benefits Beston’s processing facilities by securing a 17 million litre/10-year milk supply agreement from these farms plus an additional 24 million litre milk supply agreement from Aurora’s other farms, shoring up future supply for Beston’s planned new skim milk lactoferrin facility.

Northern TerritoryThere’s been fairly limited sales activity in the NT and Kimberley which involved international buyers – actual or potential – so it’s a little difficult for us to comment on the recent tightening of FIRB rules whereby all potential foreign buyers will need to try

buyer’s market, predominantly due to the adverse effects of the Panama TR4 banana fungus disease outbreak, which has severely weakened demand for going concern banana farms in these localities. A case in point is 288 Collins Road, Lower Tully, which is a mixed banana and sugar cane farm currently under contract for $1.065 million inclusive of the current crop and an extensive inventory of machinery. The sale analysed to $8500 per developed mixed cane and banana hectare ex-structures, which basically showed no premium for nearly 20 hectares of planted banana stools including irrigation infrastructure, albeit the banana stools were not in good condition. At this value level the current crop and machinery was also acquired far below current market value. The agent reported that the farm had been for sale for an extended period however buyers were reluctant due to its proximity to the Tully Valley outbreak. The purchaser was a local banana farmer looking to expand and at this value level has acquired an asset well below market levels of 2015-16.

We have been involved in a reasonable number of recent sales of cane, banana and grazing properties in far north Queensland. The majority of these sales have been of assets in the sub-$5 million value range. We note that nearly all purchasers have been Australian citizens, with most purchasers Queensland based. We don’t anticipate that the proposed changes to Australia’s FIRB regime to address national security risks and ensure greater compliance with FIRB approval conditions will have any effect on the rural market in far north Queensland.

South East South Australia.The market in south east South Australia continues to remain strong for the majority of rural assets with the exception of premium wineries and

The market in south east South Australia continues to remain strong.

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The Gunn Point Peninsula development proposal comes on the back of a similar NT Government proposed land release in late June for: 67,500 hectare on the NT side of the WA border (near Legune Station) called the Keep River Plains Agricultural Development Area; a proposed 26,000 hectare release to be known as the Wildman Agriculture Precinct approximately 135 kilometres east of Darwin (80 kilometres as the crow flies south east of Gunn Point), and finally the proposed 5712 hectare Larrimah Agricultural Precinct around 180 kilometres south of Katherine. We are currently working on an analysis of this much larger, combined land release proposal, bringing current real values into consideration, for the next Month in Review.

A final direction on the potential future development of Gunn Point won’t be available until after submissions to the proposal (closing 28 August) are assessed. As we have seen with the opening up of new farming country in the past in the NT (thinking Douglas Daly, Venn, and the ORIA near Kununurra) it will be interesting to see where the initial $/ha for the undeveloped land come to rest once cost of development is taken into account. The starting point of the calculation for potential investors really needs to be at the historic prices paid for developed country in the region with proven production history. We know that prices paid for developed dryland (rain fed) cropping country for areas of say, 150 to 350 hectares have been between $2500 and $3000 per hectare in the recent past, developed irrigation country (including infrastructure and water licence) has made between $9000 and $12,500 per hectare (for areas of say 100 to 300 hectares), and between $25,000 and $35,000 per hectare for mature mango plantations of say, 100 to 200 hectares in size.

supply from the underlying Koolpinyah Dolostone Aquifer will allow for 3600 megalitre allocation for around 720 hecatres of new horticultural land (equating to approximately five megaltres per hectare). This would potentially increase the total irrigated horticultural land supply in the Litchfield Municipality (which contributes $122 million per annum to the economy) by between 10 and 15 per cent. The study identified the most suitable horticultural crops might include mangoes, dragon fruit, citrus, avocadoes, bananas and cashews, all of which have been successfully grown in the region in the past. If the agricultural and horticultural development of the peninsula proceeds, it will likely do so against the potential planning backdrop of a new satellite city: population around 36,000 and to be called Murrumujuk which would be around the sized of Darwin’s current satellite city, Palmerston. Nearby Glyde Point has also been identified as a potential site for a second deep-water port once Darwin’s current deep-water port at East Arm is maxed out.

Gunn Point Development Source: NT Department of Natural Resources

Property Market IndicatorsAugust 2020

Month in Review | August 2020

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