Adelaide and Darwin revealed as top picks for investors

Adelaide now holds the crown as the country’s tightest rental market with a vacancy rate of just 0.3%, making it an attractive location for investors, according to Raine & Horne managing director James Trimble. hungry for yield and capital growth. looking to grow their portfolio.

In an indication that the tight rental market conditions will not ease any time soon, Mr. Trimble provided some on-the-ground insight into rental demand.

“Most of our offices in Adelaide report groups of 20 to 30 potential tenants showing up at every open house,” Mr Trimble said. He added that property managers are working “around the clock” to help tenants find accommodation.

As strong demand for rentals means vacancy rates will be extremely low over the long term, Mr Trimble said “the risk of having an empty investment property is low and means they can count on a flow of regular and constant cash flow”.

He explained that one of the factors tightening the screws on vacancy rates is the increased number of job opportunities in the city.

“Many immigrants will find their way to Adelaide because of the state government’s investment in the jobs of the future through investment in entrepreneurial neighborhoods such as Lot Fourteen, focused on innovation, research, education, culture and tourism.

‘Already home to 1,000 people, major employers such as Commonwealth Bank, Amazon, Google and Microsoft now operate from Lot Fourteen and Adelaide with further major growth employers to come,’ he said .

He noted that this trend comes at a time when the federal government is considering raising the migration cap potentially to 200,000 per year.

Home Secretary Clare O’Neil said in August that the prospect of increasing the current annual intake of 160,000 people would be on the table at the federal government’s jobs and skills summit taking place. will be held in Canberra from September 1-2.

She has since confirmed that the annual migration inflow will increase to 195,000 for this financial year.

Mr Trimble said raising that cap would set the tone for housing demand. “We expect Adelaide’s record vacancy rates to continue to provide investors with stable returns over the long term,” he predicted.

Adding to the case that the South Australian capital is the dream boat among capital markets, the expert pointed out that Adelaide offers affordable property prices that are nearly half of those in major cities like Sydney.

For perspective, Trimble cited the latest data from CoreLogic. “The median home value in Sydney is almost $1.01 million and in Melbourne the median is almost $792,000. In Adelaide, the median house price is just over $650,000,” he said.

With numbers like that, the expert said: “A shrewd investor with $1m could almost buy two properties in Adelaide rather than one in Sydney and bet on an almost risk-free and consistent return.”

Rising rate environment won’t shake Darwin, expert says

Similar to Adelaide, Raine & Horne Darwin managing director Glenn Grantham said the Northern Territory capital offers a combination of low property prices, tight vacancy rates and high investment returns, making it a top choice for real estate investors.

“In the Darwin market, we have the combination of real estate affordability compared to other capitals, best investment returns of up to 7-8% and near zero vacancy rates,” Mr. Grantham.

In July, data from SQM Research and Domain showed that Darwin had a vacancy rate of 0.6%.

According to CoreLogic, Darwin’s average home value was $509,833 at the end of July, making it the most affordable city among capital markets.

And while rising interest rates have rattled other markets, the expert argued that Darwin is better positioned than its larger counterparts to weather an environment of high cash rates.

He said average mortgage rates are still well below historical averages, making it an ideal time to buy in the Darwin property market for homeowners and investors.

To prove his point, he pointed out that even after the two rate hikes by the central bank in May and June, “we still have some of the lowest interest rates in history.”

According to Trading Economics, the average mortgage rate in Australia was 6.89% from 1990 to 2022.

“If buyers want to take advantage of interest rates that are still well below the long-term average, logic suggests that buying quality, well-located and affordable properties in Darwin is a logical option,” said Mr. Grantham.

The expert also noted that at the end of June, some lenders were still offering variable home loan rates below 3%. “So the message to buyers is to enter the Darwin market now because interest rates are not falling,” he advised.

Mr Grantham added that the prospect of higher interest rates has historically generated a frenzy of buying activity in the city.

“Any southern investment banker who predicts massive falls in values ​​is totally at odds with history. Usually the rise in interest rates happens because demand for real estate is booming in Darwin,” did he declare.

The chief executive also explained that lenders have financial buffers in place to protect property buyers.

“Banks built in 3% mortgage reserves against rate hikes in July last year because they knew where interest rates were going. This buffer will protect homeowners who have borrowed in recent years,” he said.

Given that the Darwin market has not seen the same levels of capital growth as southern capitals over the past two years, the expert said he was confident the city would not be hit by the crisis anytime soon. decline in value.

“Our market is still performing unlike markets on the east coast, and our market is far from peaking,” Mr Grantham said.

Adelaide and Darwin revealed as top picks for investors

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Last update: September 02, 2022

Posted: September 03, 2022