Townsville market primed to offer strong investor returns

Residential apartment buildings, like this one on Nathan Street in Cranbrook that sold for $635,000 in September 2022, are likely a good bet for investors, according to Herron Todd White. Photo: REA

High rental demand, low vacancy rates and strong rental yields create significant opportunity for investors to see returns in the Townsville property market, according to the latest Herron Todd White Month in Review.

In the March report, Herron Todd White national director of residential, Ben Esau said that national interest rate increases continue to affect the real estate market, but with volatility comes opportunity.

“For investors able to participate at increasing serviceability levels … increasing inventory levels and lower buyer demand may create opportunities to pick up better value assets than have been offered since the start of the pandemic,” he said.

“The continued lack of rental availability is also likely to ensure that rental values ​​continue to grow, improving investor returns.

“With many market vacancy rates starting at one percent and even several below one percent, it is unlikely that there is any short-term relief for tenants in sight.”

The Townsville strata unit market is falling out of favor with investors. Photo: Evan Morgan

According to the latest REA Market Trends report, the average house rent in Townsville increased from $400 per week in March 2022 to $450 in March 2023 while rental yields rose from 5.58 per cent to 5.78 per cent in that time.

For units, the median rent rose from $320 a week to $350 a week and the rental yield rose from 6.4 per cent to 6.74 per cent in the 12 months to March.

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Herron Todd White’s Townsville-based valuer Connor Bryant said rental demand remained high and vacancy rates remained low throughout Townsville, as in most of the country.

“There is significant opportunity for prospective investors to see returns in Townsville’s property market,” he said.

“Townsville continues to act as a popular base for much of the mining industry from Mount Isa to the Central Highlands, which is the major driver for our local investment market.”

Modern residential estates, such as those in Bushland Beach, attract investors. Photo: Nearby map

Mr Bryant said detached residential properties remained a safe choice for investors.

“Modern housing in developing estates (is) a common investment choice to be listed for rent, to achieve solid returns on the purchase price or construction costs,” he said.

“In terms of attached properties, there has been little construction of new units in the recent past, with many unit complexes, particularly in high-rises, nearing the end of their current life cycle.

“This could create an opportunity for investors looking for capital gains, but the current strata unit market does not appear to be the most popular as a rental investment.”

Mr Bryant said duplexes and residential apartment buildings were probably the best option for the investment market across Townsville.

“Recently, investors have sought higher yields on their purchases, leading to a softening of prices in these assets,” he said.

“In the past six months, it has been rare to find sales of apartments yielding less than eight percent gross.

“One example of this is a five-unit apartment building in Nathan Street, Cranbrook, which sold for $635,000 at a gross passing yield of 9.33 per cent.

“This is not an isolated example, showing the desire for solid rental yields held by local investors.”