The outer fringe is in for investors

Inner-Sydney-vacancy-rates-were-16-per-cent-in-April-according-to-the-Real-Estate-Institute-of-New-South-Wales_157_69450_0_14093156_300In a year of disappointing rental returns for Sydney’s traditional boom suburbs, there is a shining light as the new year progresses. According to a CoreLogic RP Data report for 2014, regions on the outer fringe yielded encouragingly high returns on houses for investors, pointing towards a profitable 2015 for those looking to explore options beyond the city limits.

With 66 percent of Sydney suburbs boasting rising median prices in excess of $1 million, combined with relatively low growth in rent prices, the opportunities to derive profit from rental investments are becoming increasingly limited.

Investors Australia-wide are feeling the pinch according to CoreLogic’s recently released Quarterly Rental Review for 2014, with rent across the combined capitals having only increased by 1.8 per cent over the past 12 months –  the lowest annual rate in more than a decade. What’s more, the last quarter to December saw house rents in Sydney only appreciate 1 per cent, while unit rents dropped by 1 per cent.

This may be promising news for tenants looking to enjoy the summer months, but CommSec Chief Economist Craig James said investors should be wary of these low levels of rental growth.

Nonetheless, while houses in many inner city suburbs struggle to yield positive results for investors, rental property in regions like the Central Coast, southern Sydney and inland towards Blacktown have proven lucrative.

For example, according to CoreLogic RP data for 2014, the highest gross rental yields for the Sydney region were not attributed to typically popular inner city suburbs – like Woolloomooloo, which recorded a gross rental yield for houses of 4.3 per cent – but to Warragamba in south-west Sydney, with an impressive gross yield of 6.3 per cent.

Economical house prices partnered with affordable rents have provided solace for for families, retirees and first-time renters, pleasing investors and keeping rental growth on the Central Coast particularly sound at 2.5 per cent in the last quarter. Similarly the wider Wyong region performed strongly against CBD properties, indicating impressive indicative gross rental yields for 2014 upwards of 5 per cent in many cases.

The rental outlook may appear disheartening for urbanite investors, but encouraging results outside Sydney’s borders may indicate a potential geographic shift for those looking to leverage off affordability pressures in the city.

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