Quest serviced apartment yields rising with Tasmania, Gladstone and Wagga yields near 8%

Investors in some Quest Serviced apartment developments should expect yields to rise to close to 8% over the next three years.

Using the example of a high-yielding one-bedroom apartment in Quest Launceston, Quest anticipates that gross yields will reach 7.8% by 2015, based on annual rent increases of 4%.

Annual rent increases of 4% are built in to every Quest lease with a market review taking place at the end of each five year term.

The latest Quest serviced apartment stock list shows that yields currently range from just over 6% to 7.3%.

The strongest returns are in the recently refurbished Quest Wagga apartment block, with gross yields of around 7.29%.

Two apartments measuring 88 square metres with two bedrooms remain available for purchase in Quest Wagga for $399,000 returning annual rent of $29,095.

Yields in excess of 7% are also currently on offer for serviced apartments in Quest Darwin (though no apartments are currently available), in Quest Gladstone and in Quest Launceston.

A report by UK-based Travel Intelligence Network identified Quest as the fastest growing player globally in the serviced apartment market with a 28% increase in rooms in its network over the past two years.

Quest is now second only to Mantra in terms of serviced apartment room numbers.

In February, Quest announced plans to build  ten new apartment buildings in NSW by 2014.

According to the same report, the serviced apartment sector continues to expand in Australia and New Zealand with a 14.5% increase in supply since 2011.

A separate report by Jones Lang LaSalle (JLL) Hotels found that of the 3,712 hotel rooms under construction in September 2012, a third were serviced apartments.

Serviced apartments available for purchase in Quest Gladstone start from $294,000 for a 53 square metre one-bedroom apartment and from $280,000 in Launceston for a one bedroom apartment measuring 58 square metres.