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The latest happenings in the Melbourne property market. For our Essays and The Secret Agent Report, see our Research page.


Category Archives For: Property Investment

Investment Returns for Inner Melbourne

In Secret Agent’s latest Rent report we took a detailed look into the yield of each inner Melbourne suburb. See Table 1.

An investor should be looking to try and maximise yield when finding a rental property. However, they also need to be mindful of the relationship between yield and risk.

Often a higher yield can mean more risk, such as oversupply.

The higher yield of inner Melbourne (5.3%) reflects the greater risk premium. East Melbourne which offers a tight yield of 3.47% is the ultimate blue chip location, however the yield isn’t too attractive.

Be careful of looking solely at yield to making investment decisions. It’s possible to obtain yields above 10% in remote regional locations, but once a tenant has vacated, it may be a long time before another tenant is discovered.

Table containing investment returns of inner Melbourne suburbs


The Secret Agent Report – Rent: Apartments

We have just released our latest Secret Agent report!

This month, Secret Agent takes a look at the performance of inner Melbourne apartment rental yields from 2012 to 2017. Our report compares median apartment prices to median weekly rent to find out which suburbs returned the highest yields in the past year.

Unlike houses and townhouses, apartment prices have remained relatively stable in recent years. Over 1,500 apartments leased between February 2012 and May 2017 were included in the study sample. This includes 600 one bedroom, 840 two bedroom, 80 three bedroom and 4 four bedroom apartments.

Access the Apartments Rent report now!


Inner Melbourne Rental Yields for Houses 2012-2017

Infographic showing highest and lowest rental yields in inner Melbourne, Australia in 2017

Last week, Secret Agent released our report on the current state of rental yields for houses across inner Melbourne. Here is a summary of our findings:

  • Over the last 5 years, yields have dropped by 0.42%, from 3.06% in 2012 to 2.64% in 2017.
  • During this period, median house prices have increased by 38% (9% p.a.), compared to only an 11.8% increase in weekly rents (2.88% p.a.).
  • On average, median weekly rents are between $500 and $700 for most suburbs. Sale prices tend to fluctuate significantly according to suburb.
  • Suburbs with lower median prices tend to have higher yields, as weekly rent is mostly consistent across all regions.
  • High and low yields are not concentrated in any particular region of inner Melbourne.
  • Collingwood, Cremorne and West Melbourne had the highest median yields in 2016/17 at 3.69%, 3.32% and 3.26%, respectively.  Median prices were well below the $1million mark.
  • Burnley, East Melbourne and Alphington had the lowest median yields at 1.35%, 2.07% and 2.31%, respectively. Median prices were all above $1.3million.
  • Sale price is strongly, negatively correlated with yield (-47%). Yield is more dependent on purchase price rather than rental income.
  • Yields are even lower for larger properties, as sale price increases faster than median rent.
  • In 2017, 2, 3 and 4 bedroom homes can expect to yield 2.72%, 2.61% and 2.52%, respectively. All three types have had the lowest yields since 2012.
  • Investors paying high prices for properties are even more reliant on capital growth to increase their returns.

Budget 2017 – Winners and Losers in Property

WINNERS

First Home Buyers
First home buyers will be able to use voluntary contributions to their superannuation to save for a house deposit. Withdrawals will be taxed at a lower rate, but the amount you can contribute is capped at $15,000 a year and $30,000 all up. Both members of a couple can take advantage of the scheme.

In Victoria, the state government will abolish stamp duty for first time buyers of homes valued up to $600,000, make cuts to stamp duty on homes valued up to $750,000, and also double the First Home Owner Grant to $20,000 in regional Victoria.

With the first home super saver scheme, we may see increased demand for property below $600,000. This will push up the prices of houses and townhouses in outer suburbs such as Cranbourne. Inner city suburbs will be less affected, as average prices are typically above $600,000. Developers will also have to compete more agressively for development sites that allow sub-$600,000 townhouses to be built and sold in these outer suburbs.

Downsizers
A person aged 65 or over will be permitted to make a non-concessional contribution to superannuation of up to $300,000 from the proceeds of selling a principal residence owned for the past ten or more years from 1 July 2018.

This is good news for real estate agencies operating in areas popular among downsizers, such as the inner city, as there is more incentive for elderly property owners to sell their home. Developers can also benefit from creating stock in these areas. Read the full post


The Secret Agent Report – Rent

We have just released our latest Secret Agent report!

In recent years, we’ve seen house prices skyrocket while rents have risen less dramatically. 

This month, Secret Agent compares rent increases and house price growth in inner Melbourne to find out to what extent yields have decreased over the last 5 years.

Access the Rent report now!


The Secret Agent Report – Capital Growth Update

We have just released our latest Secret Agent report!

This month, Secret Agent analyses the updated capital growth index for the first quarter of 2017. The index tracks all resales of properties in inner Melbourne suburbs since January 2000.

By using only resales of the same, unchanged properties over time, the index tracks the true capital growth of properties in Melbourne, taking out factors such as subdivisions, extensions and any other alterations, all of which affect measures of average prices.

Access the Capital Growth Update report now!


The Secret Agent Report – End of Year Review

We have just released our latest Secret Agent report!

In this issue, we provide a deep overview of the year in terms of the yield curve, apartment price per square metre rates and capital growth, concluding with a wrap up of each area’s performance in 2016.

From all of us at Secret Agent, we wish you a very happy holiday season!

Access the 2016 End of Year Review report now!

secret agent report end of year review 2016


Investment Tips: Time Value of Money

Icon of a clock multiplied by an icon of a dollar note equals a question mark, to illustrate the concept of time value of money.

This week, Secret Agent illustrates the importance of time value of money when investing in property.

There is a saying that money earned today is worth more than money earned tomorrow. The main reasons this is true are:

  1. Inflation (rising price levels deteriorate the spending power of cash)
  2. Interest rates (money that can be invested today earns interest, which compounds over time
  3. Opportunity cost (the ability to use money now rather than having to wait for it)

Read the full post


Trump Makes Bond Yields Great Again

A look at the bond market reveals a very large jump in bond yields the day after Trump was elected.

What a year it has turned out to be. From the mild (Western Bulldogs Premiership) to the momentous (Brexit and Trump presidency), 2016 has seen it all. Before discussing more recent events, let’s take a look at how bond yields have been performing since our last update in September. Read the full post