The investment climate in Melbourne’s north western suburbs is experiencing a revival this winter. Yields are on the rise across much of the region, as the property market downturn makes investment purchases more affordable while rents hold strong.
Epping units were the top performer in the 12 months to April, with the suburb posting a 5.2 per cent indicative gross rental yield in the 12 months to April.
Essendon North and Gisborne units were not far behind, generating a 4.9 per cent yield – that is the annual rental income received from a property as a percentage of its property value.
They were followed by Melton and Craigieburn, which each produced a 4.8 per cent yield on units, and Kensington and Flemington where the yield was 4.7 per cent, according to CoreLogic data.
In the housing market, Melton, Kurunjang and Fraser Rise returned the top yields, of 4 – 4.2 per cent.
This compared to an average 3.1 per cent yield on houses and a 4.2 per cent yield on units across greater Melbourne.
While rents have generally remained strong across the past year, a traditional winter drop in demand for rental accommodation and an increase in new stock coming on to the market has seen cyclical rents dip in a small number of suburbs.
Rent rises, however, have been led by Brunswick East, where the median asking rent for houses rose 14.3 per cent from $525 to $600 a week in the 12 months to April.
Woodend houses were next in line, with rents jumping 13.6 per cent to $500 a week, followed by Romsey, where median house rent increased 11.7 per cent to $430.
Unit rental growth was more modest, led by a 6.25 per cent increase in Airport West to a weekly $425.
Brad Teal Real Estate founder and director Brad Teal said there had been a shortage of investors in the market, with many choosing to renovate or extend their home rather than buy an investment property.
But, with the election out of the way, lending restrictions easing and two consecutive cuts to the official interest rate, he predicted investors would soon return.
“We had seen homebuyers dominate the market but as things ease up we’ll see more investors come into play,” Mr Teal said.
“After the election, there are no more excuses for those who want to engage in the property market. Now is the time.”
Melbourne’s property market downturn has put buyers in the box seat in some suburbs, with moderating prices opening up opportunities for savvy investors.
But at the same time, strong capital growth across townships in the Macedon Ranges and in flagship inner north western suburbs continues to produce attractive returns for investors who have weathered the market.
With population growth expected to underpin continued strong demand for rental properties, investors are tipped to reap big rewards.
Brad Teal Real Estate’s Rental Department Manager Prue Bryant said that while inner north-western suburbs offered plenty of good rental opportunities, Sunbury was another top option.
“Sunbury is a great area to invest in because you get pretty good rental return, and the rent is affordable for a lot of families,” she said.
“The biggest challenge for an investor is finding the right property that will attract the right tenant at the right price.”
Renters are typically well-educated and know how much a property should be rented for. This means it is important for landlords to ensure their property is priced correctly to maximise occupancy.