Townsville market primed to offer strong investor returns

High rental demand, low vacancy rates and strong rental yields are creating significant opportunity for investors to see returns in the Townsville property market, according to the latest Herron Todd White Month in Review.

In the March report, Herron Todd White national director of residential, Ben Esau said nationally interest rate rises continued to impact the real estate market but with volatility came opportunity.

“For investors who can participate at increasing serviceability levels … increasing stock levels and lower buyer demand may create opportunities to pick up better value assets than have been on offer since the start of the pandemic,” he said.

“The continued lack of rental availability is also likely to ensure rental values continue to grow, improving investor returns.

“With many market vacancy rates starting with one per cent and even several below one per cent, it’s unlikely there is short term relief for tenants in sight.”

According to the latest REA Market Trends report, the median house rent in Townsville increased from $400 per week in March 2022 to $450 in March 2023 while rental yields rose from 5.58 per cent to 5.78 per cent in that time.

For units, the median rent increased from $320 per week to $350 per week and the rental yield was up from 6.4 per cent to 6.74 per cent in the 12 months to March.

Herron Todd White’s Townsville based valuer, Connor Bryant said rental demand remained high and vacancy rates remained low throughout Townsville, as with most of the country.

“There is significant opportunity for prospective investors to see returns in Townsville’s property market,” he said.

“Townsville continues to act as a popular base for much of the mining industry from Mount Isa to the Central Highlands, which is the major driver for our local investment market.”

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Modern housing estates, such as this one in Bushland Beach, are attracting investors. Picture: Nearmap

Mr Bryant said detached residential properties continued to be a safe choice for investors.

“Modern housing in developing estates (are) a common investment choice to be listed for rent, achieving solid return on the purchase price or build cost,” he said.

“As for attached properties, there has been little construction of new units in the recent past, with many unit complexes, particularly in high rise buildings, approaching the end of their current life cycles.

“This could create an opportunity for investors looking for capital gain, however the current strata unit market does not seem to be the most popular as a rental investment.”

Mr Bryant said duplexes and residential flats buildings were likely the best bet for the investment market across Townsville.

“Recently, investors have sought higher returns on their purchases, resulting in a softening of prices in these assets,” he said.

“In the past six months, it has been rare to find sales of flats which return under eight per cent gross yields.

“One example of this is a five-unit flats building on Nathan Street, Cranbrook, which sold for $635,000 at a gross passing yield of 9.33 per cent.

“This is not an isolated example, displaying the desire for solid rental returns held by local investors.”

Article source: Queensland Property Investor