Courier Mail

Investor hotspots revealed

The suburbs delivering the biggest rental returns are emerging as the new battleground for investors as sweeping tax changes reshape buying behaviour and Brisbane’s property market begins to cool.

With Brisbane home prices falling for the first time in more than three years, many buyers have hit pause, but research shows those still buying are targeting suburbs where stronger rental yields can help offset the loss of negative gearing concessions.

Brisbane City, Fortitude Valley, Spring Hill, South Brisbane and Woolloongabba currently offer the highest rental yields for units across greater Brisbane, with gross rental returns ranging from 4.6 to 5.2 per cent, according to PropTrack. For houses, the strongest yields are in more affordable markets including Russell Island, Coochiemudlo Island and Laidley, where gross rental yields range from 4.5 to 5.3 per cent.

REA Group senior economist Anne Flaherty said changes to negative gearing and the capital gains tax discount would encourage investors to focus less on tax benefits and more on rental income.

Rather than driving investors out of the market altogether, she said the changes were likely to reshape who was buying and what they were buying.

“The kinds of investors who might be more active now are older people who already have a lot of wealth who might be looking to invest that money, not looking to take advantage of negative gearing, which is more attractive to younger people who are still in the workforce,” she said.

Ms Flaherty said the best-performing house markets for rental yield were typically in regional areas and Brisbane’s outer fringe, where lower purchase prices boosted returns.

“Generally speaking, regional areas have lower home prices than the capitals, but we don’t see a proportional decline in rents,” she said.

By contrast, the highest-yielding unit markets were concentrated in Brisbane’s inner city, where tight rental supply and strong tenant demand had pushed up rents sharply while apartment prices remained comparatively affordable.

Hotspotting director Tim Graham said the attention was shifting towards units in Greater Brisbane, which were supported by affordability pressures, stronger rental yields and tight vacancy rates.

Ray White chief economist Nerida Conisbee said investor participation in the housing market dropped in the month after the federal budget was delivered but had since recovered and there was no evidence of a post-budget investor sell-off.