Newcastle upper end market sees 6% and above yields: HTW residential

Newcastle upper end market sees 6% and above yields: HTW residential
Staff reporterDecember 7, 2020

The Newcastle/Hunter area has a range of yields with the general figures sitting between 3.5% and around 6%, according to the latest Herron Todd White (HTW) residential report. 

The valuation firm took a look at rental yields across the nation.

"When discussing yields and property investments, you can break it into bite size chunks and compare the yield aspect of property versus the end capital growth," the valuation firm said. 

"Each has their benefits in the property realm and it all depends on what type of investment you require. Like all good investments you must find what works best for you in each situation.

"At the lower end you find the yields averaging around the 3.5% mark. These are the investments that are good quality properties in desirable locations which are steady and safe and in demand tenancy wise.

"Here these types of investments usually have strong capital growth and appreciation on the property.

"Basically, not huge amounts of income (or cash flow) but good solid capital growth figures generally."

The firm suggests that suburbs such as Hamilton and surrounds, Georgetown and New Lambton are examples.

"At the upper end, you find the 6% and above yields," it said.

"The higher the yield, the riskier the investment becomes, mainly because you take on more risk with the reward of higher cash flow.

"The capital growth is also usually more stunted as the yield stream is the main driver in these types of investments.

"As with any greater risk and greater reward style scenario, there is much less stability and potential for a negative effect resulting from outside forces.

"We are also finding more dual occupancy and ad-hoc boarding or student style housing that do have higher yield potential. But on the back of this greater reward comes the potential for problems which can include planning, zoning and ongoing maintenance issues. "

At any stage the property could become non-compliant with costly remediation works on the cards to rectify the issues, the report warns.

It notes any unplanned costs associated with investment properties is never ideal and something that needs to be factored into any planning for would be investors.

"We’ve seen plenty of new construction in the area to include a main house at the front of the site with a newly constructed granny flat at the rear. These are becoming common sights during our valuation runs," the valuation firm added. 

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