Whether at a family BBQ or another social event, you’re likely to have met someone investing or buying a home in Queensland in recent years.
So much so, that you might have considered investing in the state of QLD yourself.
So why are interstate property investors and first home buyers flocking to Queensland’s metropolitan and regional property markets?
Well, they’re hoping to cash in on notably high rental yields.
This phenomenon has captured the attention of investors and industry experts alike, so, in this blog, we delve into the intricacies of Queensland’s property market, seeking to understand the reasons behind this yield outperformance and how investors can capitalise.
Understanding high rental yields
But first, what do we mean by rental yields?
Rental yield is a financial metric used in real estate to measure the return on investment generated by a property through rental income.
Suppose you own a property with an annual rental income of $24,000, and the property is valued at $300,000.
The rental yield would be calculated as:
(24,000 / 300,000) x 100 = 8%.
In this way, “high” rental yields refer to a property investment’s ability to generate “high” income in proportion to the property’s cost, and of course, a high yield makes it an attractive prospect for investors.
Comparing QLD rental yields to the rest of Australia.
With a population of 4,703,187 people and 29.39% of its occupants living in rental accommodation, the median rent for houses in QLD is $560 per week and the median rental yield is 4.45%. Comparatively, the median rent for a unit in Queensland is $480 per week, producing a rental yield of 4.84%.
Compare this to one of the largest property markets in Australia, Sydney, where the average rental yield of houses was 3% and QLD appears to be a profitable market for budding investors.
Furthermore, of the top 10 highest yield suburbs in Australia, 4 of them are from QLD, second only to Western Australia which had 5, and QLD is also the only state with 10 or more suburbs boasting yields above 9%.
All of this is to say one thing – QLD rental yields are outperforming and investors are beginning to notice.
What causes high rental yields in QLD?
There are a variety of factors contributing to QLD’s high rental yields. Let’s take a look:
High Demand
With its vibrant cities, coastal lifestyle, and economic opportunities, Queensland is a desirable living and investment destination and this fuels a constant influx of residents. This sustained demand for housing, both from locals and those relocating to the state has resulted in heightened competition for Queensland rental properties, consequently boosting rental yields across various property types.
Low Supply
Despite this growing demand, the Queensland market does face challenges when meeting housing needs, particularly in high-demand areas. This limited housing supply creates a scarcity effect, allowing property investors to charge premium rents due to the relative shortage of available rental units.
High-Interest Rates
While high interest rates compared to recent years may deter some individuals from entering the property market as buyers, it simultaneously contributes to a thriving rental market as many Queenslanders and interstate movers opt to rent instead of buy. This shift in demand towards rental properties is a large contributor to increased rents and higher rental yields for property owners in Queensland.
Economic Growth
Queensland’s growing economic prosperity is marked by increasing job creation, business development, and overall industrial growth. As employment opportunities expand, attracting a diverse workforce, the demand for rental accommodations rises. Queensland Property investors can therefore capitalise on these economic conditions, enjoying enhanced rental yields as a reflection of the state’s flourishing economy.
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