A house may seem the obvious choice for those looking to buy in regional Australia but a new report shows for investors that an apartment can provide better rental yields.
Of the top 10 regional locations named in the top 10 affordable regions in the PRD Regional Smart Moves Report, all have recorded stronger yields for apartments compared with houses.
“A lot of people would think in terms of rental yields that houses would have a higher rental yield but in these regional areas that is not the case,” said report author and PRD chief economist Dr Diaswati Mardiasmo.
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“In regional areas because there are not enough houses being created, most of the stock coming onto the market are units and the price of houses has gone up as a result.
“However the rent that houses has actually become a little more stable and so house yields have started to come down a bit.
“Whereas units are normally 20-25 per cent cheaper than houses and so that actually increases the yield as rents for units have started to increase as well.”
The lower prices of units also gave investors a better opportunity to get into the market too.
Read more: How to buy your kids a home without giving them your life savings
Watch list
While a lower price was one drawcard for investors it was also important that the areas identified in the report had good prospects for a typical investment period of seven to 10years.
“We’ve chosen places that have quite a lot of infrastructure and commercial projects so we know that employment will keep on coming in and will continue to attract more people to the area,” Dr Mardiasmo said.
Current housing supply and vacancy rates are also key factors for areas to make the list, all major considerations in property investing.
The nationwide study found key locations in Queensland, NSW and Victoria including Bendigo.
On the ground
PRD Bendigo agent Matt Ingram said investors had dominated the Victorian regional city’s market in recent years.
He said investors were initially attracted to houses they were now turning to units, as prices rose.
Today, however, local owner-occupiers were now coming back to buy.
“They are re-entering the market, with a new appreciation of current prices,” Mr Ingram said.
He said first home buyers, with expanded budgets due to government programs to get them into the market.
“Where they were looking at properties in the sub-$650,000 range they are now willing to pay up to $750,000,” he said.
Long run
The attractiveness of regional real estate is set to continue, despite the current volatile environment and interest rate rises according to Dr Mardiasmo.
“The outlook at the moment for regional real estate is a little bit more positive than capital cities,” Dr Mardiasmo said.
She said that gains in the regional property market during COVID, were a good indicator of its robustness and showed it was a little more insulated than capital cities to global impacts and immigration.
“The regional markets have always been ones that hold a more steady value compared to capital city markets.”
