Regional ‘cheapies’ best bets for investors

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Regional Victorian towns have emerged as the best bets for budding property investors on a budget, new research has found.

Real Estate Institute of Victoria data shows high rental yields — which are double those on offer from the average Melbourne house — are up for grabs in Moe, Stawell, Shepparton and Wodonga.

And anther property research firm, Hotspotting, has named the Latrobe Valley and Bendigo among the regional Australian “cheapies with prospects” investors should be targeting.

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Hotspotting founder Terry Ryder said buyers could snare homes in the $200,000s and $300,000s in these regions, and expect capital growth.

“You’re also getting good rental returns — you’ve got a good chance of being cashflow neutral, or even positive,” he said.

“That makes them a good option for young investors starting out.”

The REIV found regional towns are offering some of the state’s highest rental returns.

A typical three-bedroom house in Latrobe Valley town Moe generated a 6.6 per cent gross rental yield in the 2018-19 financial year — second only to one-bedroom apartments in Melbourne’s CBD (6.7 per cent).

The figure measures how much income a property produces each year as a percentage of its value.

The REIV also found median-priced three-bedroom houses in Stawell, Shepparton and Wodonga are returning yields above 6 per cent, and those in Mildura, Morwell, Churchill, Sale, Traralgon, Warrnambool and Wangaratta, above 5 per cent.

In comparison, the median rental yield for a house in greater Melbourne is 2.9 per cent.

REIV president Robyn Waters said demand for rentals was “at an all-time high” in many regional spots, with the average vacancy rate notably a low 1.3 per cent in the Latrobe Valley.

“There is simply not enough stock on the market to meet demand,” she said.

186-188 High St is for sale for $650,000 in Heathcote, where the median house price has jumped 11 per cent annually.

Mr Ryder said while the Latrobe Valley had been expected to take an economic hit from the Hazelwood power station’s 2017 closure, it had stayed strong due to continued investment from government and the private sector.

Towns including Morwell ($165,000 median house price), Churchill ($180,000) and Moe ($200,000) also offered “another level of affordability”.

Bendigo, like Ballarat, had a rising population, diverse economy and was well connected to Melbourne.

But Mr Ryder said Bendigo had more growth left in it, with only two of its suburbs having notched double-digit annual gains (Heathcote to a $310,000 median and California Gully to $280,000).

Defence contractor Thales and the Bendigo and Adelaide Bank were also big employers in the city.
“That’s all important for real estate, it helps drive growth,” Mr Ryder said.

He said Echuca, Benalla and Warrnambool were also emerging as solid investment prospects.

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‘Cheapies with prospects’


Cheapest suburbs

Long Gully: $260,000 median house price

California Gully: $280,000

Eaglehawk, Heathcote, North Bendigo: $310,000

Top annual growth suburbs

Heathcote: up 11% to $310,000 median

California Gully: 10% to $280,000

Maiden Gully: 7% to $515,000


Cheapest suburbs

Morwell: $165,000 median house price

Churchill: $180,000

Moe: $200,000

Top annual growth suburbs

Moe: up 12% to $200,000 median

Newborough: 7% to $240,000

Traralgon: 4% to $300,000

Source: Hotspotting using CoreLogic data

Victoria’s highest rental yields

Melbourne CBD (one-bedroom unit): 6.7%

Moe (three-bedroom house): 6.6%

Stawell (three-bedroom house): 6.4%

Shepparton (three-bedroom house), Southbank (one-bedroom unit), Melbourne CBD (three-bedroom unit): 6.2%

Wodonga (three-bedroom house): 6%

Mildura, Morwell (three-bedroom house): 5.7%

Churchill, Sale, Traralgon (three-bedroom house): 5.6%

Warrnambool (three-bedroom house), South Yarra (one-bedroom apartment): 5.5%

Melbourne citywide average: 2.9% (houses), 3.8% (units)

Source: REIV, 2018-19 financial year