Strong rental returns

Investors in regional Victoria enjoyed some of the state’s strongest rental returns in the last three months of 2017, with almost every property type outperforming those in metropolitan Melbourne.

New REIV data shows two-bedroom homes in regional Victoria delivered the highest returns, at 4.8 per cent, while three-bedroom properties produced returns of 4.5 per cent.

By comparison, the same sized homes in metropolitan Melbourne delivered returns of just 2.6 and 2.8 per cent respectively.

The yield is an important factor for investors to consider as it reflects a property’s annual rent as a percentage of the purchase price. The ideal investment property combines a low purchase price and a high weekly rent.

In the December quarter, Morwell in south east Victoria recorded the state’s highest returns for two-bedroom homes with a yield of 8.5 per cent.

This was followed by Echuca and Mildura where the same property type achieved returns of 6.5 and 6.4 per cent respectively.

Other regional towns where smaller homes are paying dividends for investors include Moe (6.3 per cent), Wendouree (6.3 per cent), Golden Square (5.8 per cent) and Sebastopol (5.8 per cent).

Meanwhile, Churchill and Mooroopna had the state’s highest returns for three-bedroom houses at 7.4 per cent.

Family homes also achieved strong rental returns in the Wimmera region with Stawell and Horsham recording yields of 7.1 and 6.7 per cent respectively.

Moe and neighbouring Newborough also realised strong rental returns for three-bedroom homes with yields of seven and 6.9 per cent respectively.

Three-bedroom homes delivering yields of around six per cent were also evident in Numurkah, Benalla, Mildura and Shepparton.

A high yield allows investors to service their loan; however, it is not a guarantee that a property in a particular area will continue to do well.

For more information on gross rental yields by property type and town, visit reiv.com.au/market-insights.