Investors should look to smaller capital cities for returns: RP Data
With strong results for dwelling value growth being recorded in the latest RP Data Core Logic Home Value Index, RP Data’s research director Tim Lawless suggests that growth might be better outside of the ‘big’ capitals.
At present, Lawless noted that investors are concentrated across Sydney and Melbourne, where the markets have proven strong capital gains but now lower yields. In fact, yields are currently so low in Sydney that they’re on track to race below Melbourne.
“Potentially there are better investment returns to be had in the smaller capital cities where the growth trend is less mature and yields are also healthier,” he said.
While Sydney and Melbourne recorded particularly strong increases in prices over the last growth cycle, other capitals have remained subdued.
“Looking at the remaining state capitals over the same time frame, the next best performer was Perth where values are now 15% higher, followed by Adelaide at 9.9%, Brisbane with 5.3% and Hobart where dwelling values are actually 1.5% lower,” he said.
While yields are compressing in most capital cities, Adelaide and Hobart’s apartment markets have actually moved higher for yields over the past 12 months.
However, while Lawless advisers investors look at these smaller capitals, it’s clearly not a common approach quite yet.
“With yields so low in the cities where values are seeing the largest capital gains, it is clear that investors remain very much focussed on value growth rather than yield,” he said.
