Central Gold Coast sees variations in rates of return to investors: HTW residential
In central Surfers Paradise, agents report variations in rates of return to investors, according to a recent Herron Todd White (HTW) residential report.
The valuation firm took a look at rental yields across the country.
"Older high rise units close to the beach have a high underlying land value component and are subject to higher council rates, which themselves are variable," the valuation firm said.
For example, if the owner is an owner- occupier, there is a lower rates level.
If the unit is let on a permanent basis the rates level is higher, and if it is holiday let, the rates level is higher again.
According to the HTW report, this is just the rates themselves, not including the water rates which stay the same regardless.
However, if the property has an efficient water usage rating, it is permissible to pass on the water and sewerage rates to the tenant, which increases the return to the investor.
The Chevron Renaissance development is a modern circa 2004 three tower development comprising a total of 714 units plus retail and office use.
A leading agent active in this development reports that investors are happier if they can achieve over a 4% net yield.
This agent sold unit 2066 for $308,000 on 15 May 2009, being a two-bedroom, one-bathroom high-rise unit on level six within the holiday letting pool.
The unit receives a guaranteed rental of $26,500 per annum from on site management.
After outgoings, the net return is $14,746, showing a net yield of 4.78%.
In addition to the above return, the owner is also entitled to 14 nights personal occupation of the unit for their own use subject to terms and conditions, the HTW report noted.
This agent also reports that the expected return on three-bedroom units in the development reduces to around 4% as the purchase price is much higher.
These higher returns are made possible by the higher expected occupancy rates achieved by the managers. This building is reportedly currently achieving around an 85% occupancy rate.
The Beachpoint development is an older circa 1978 development comprising a total of 142 units situated opposite the beach in central Surfers Paradise.
A one-bedroom unit on the tenth floor with a south- west aspect and restricted ocean views is currently under unconditional contract for $260,000, with settlement due in less than two weeks.
This unit is tenanted on a 12-month lease at $360 per week.
Outgoings including rates, water and sewerage rates, and body corporate fees at $152 per week total $10,439 without landlord insurance which leaves $8,281 net income showing a net yield of 3.19%.
"This lower return is typical for older unit buildings with slightly lower occupancy rates and a higher underlying land value component per unit," the valuation firm commented.
The agent selling the above property reports typical returns for this style of unit generally range between 2% and 3%.
Further away from the beach in Carrara, a leading local agent reports that investors in cluster unit townhouse complexes aren’t stating what return they are chasing, but are very interested in the potential or actual rental return and want to know what the outgoings are including body corporate fees, rates and water charges and then they work out the net return themselves.
"Anecdotally he feels they are seeking over 4.5% and for nothing to require repair for the first 12 months," the valuation firm said.
