The higher the suburb median price, the lower the expected yield in Coffs Harbour: HTW residential

The higher the suburb median price, the lower the expected yield in Coffs Harbour: HTW residential
Staff reporterDecember 7, 2020

The expected gross yields in Coffs Harbour are not dissimilar to many regional localities with returns in the order of 3-5% for the standard unit or house up to $700,000, according to the latest Herron Todd White (HTW) residential report. 

The valuation firm took a look at yields across the nation to dissect where to find the best returns in residential markets.

The HTW report the executive permanent weekly rentals in Coffs Harbour are thin with limited demand for the $700 per week rents.

The higher the suburb median price, the lower the expected yield on a permanent residential rental basis.

"If it is return you are after then we must look to other forms of rental income in the form of holiday rents or maximise your return through multiple accommodation buildings," the valuation firm said. 

"Firstly, holiday rentals. These can take the form of whole property or Airbnb. Either way, if you build it they will come.

"In other words local tourism is up and there is high demand for short term accommodation especially during holiday periods or when organised sporting events come to town."

Coffs Harbour has hosted many large touch football and Oztag events which literally overrun all available accommodation facilities, highlighting the need for more, the HTW report said.

The returns in this sphere are higher, expected around 5% to 10%, however there will be extra running cost in the form of cleaning and management to consider.

The plus side is the out of town owner has the ability to use the property for personal use.

"Let’s look at multiple tenancies which can take several forms from the basic converted garage to detached granny flat in the back yard or purpose built duplex or flat accommodation building," the valuation firm said. 

"These types of properties provide extra return with the ability in some cases to strata title and sell individually in the future, however again you will struggle to do better than a 3% to 7% return on your money."

Typically at the higher end of the spectrum, 7% or more will be reflective in the condition of the property generally requiring short term upgrade renovation work which is representative of the lower purchase price compared to the rental return.

An example of this is 19 Arthur Street, Coffs Harbour (pictured below) which sold for $1.3 million being a dated two level hostel accommodation complex comprising 15 bedrooms with manager’s unit.

The higher the suburb median price, the lower the expected yield in Coffs Harbour: HTW residential

It was sold on an analysed yield of 8.15% which on the surface of things appears strong, however required significant upgrade work.

According to the report, there are no specific places or suburbs attracting higher yields, rather supply and demand is the key factor.

"We consider the safe bet in the future when looking at maximizing returns will be short term accommodation, typically smaller one and two bedroom set ups which are fully furnished," the valuation firm said. 

"As stated there is a growing holiday market plus the advent of the Coffs Harbour Pacific Highway bypass construction due to start in the coming years will only add to this shortage need.

"We have seen this happen already in the smaller townships of Grafton and Yamba since the commencement of infrastructure projects such as the Grafton Bridge and Pacific Highway upgrade between Grafton and Ballina.

"So keep an eye on the multi-accommodation market especially duplex and flat buildings which may show lower yields at 4% to 5% now, however with a coat of paint, new floor coverings, some basic furniture packages and management skills can see this return double in the coming years. Let’s not forget the by-product of this work will also be capital gain."

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