Savvy property investors may want to look towards regional Queensland to park their cash in, with country towns in the state leading rental returns across Australia.
Nearly half of the top 100 highest yielding suburbs in the country are in regional Queensland, according to CoreLogic’s latest Top Rental Performers Report.
Rental yield is the annual return of a property indicated as a percentage of the property’s value; the higher the yield, the more of your investment you’re potentially earning back.
The small coal mining town of Blackwater in central Queensland takes the top gong nationally, generating rental returns of 11.7 per cent. Investors looking to buy there would need to fork out a median property value of $127,000, while the median weekly rent is $250, figures from REA Group show.
The average investor buying in Blackwater can expect to make monthly repayments of about $575, according to data from RateCity, which would be well below the rental income the property could produce, making it a cash flow-positive asset.
Coming in third place was the Cairns suburb of Woree, which yields 10.8 per cent on an average property. For someone investing here, the median property value is much steeper at $320,000 while median weekly rents are $350.
In contrast to Blackwater, monthly repayments of $1449 would likely make it a negatively geared asset, where the property is costing more to own and maintain compared with the rent it can earn.
Other regional towns in Queensland that made the list include Manunda in Cairns, where properties yield 9.5 per cent, and Bungalow, also in Cairns, where investors can expect to pocket back as much as 8.7 per cent a year.
In comparison, rental yields in Sydney and Melbourne are much sharper at 3.5 per cent and 3.6 per cent respectively, according to research by CoreLogic.
Many investors seem to have spotted an opportunity, with investor housing finance commitments surging by 13.1 per cent in July 2019 according to recent CoreLogic data, the highest the numbers have been since November 2018.
|Suburb||Median property value||Loan amount||Monthly repayment (P&I)||Median weekly rental||
Cash flow positive/negative
|Blackwater||$127,000||$114,300||$575.07||$250||P - $424.93||11.7%|
|Woree||$320,000||$288,000||$1,449||$350||N - $49||10.8%|
|Manunda||$346,750||$312,075||$1,570.13||$350||N - $170.13||9.5%|
|Bungalow||$324,500||$292,050||$1,469.38||$378||P - $42.62||8.7%|
*median property values and rental data from REA Group
*based on a 90% LVR with a loan term of 30 years on a 4.44% interest rate, data from RateCity.
But investors should keep in mind that these types of properties generally tend to be located in remote areas, which may make the home harder to resell.
And the capital growth of real estate in regional areas in any state is generally much slower than in capital cities such as Sydney and Melbourne, which have seen gains of 19.4 per cent and 23.5 per cent in the past five years.
High yielding properties may suit investors seeking to pursue a positive gearing investment strategy. In fact, with the official Reserve Bank of Australia cash rate at a historical low of 1 per cent, this can be an attractive path for some people looking for an investment that, essentially, makes a profit.