While value is scarce for investors in the Sydney and Melbourne property markets, there is plenty in Byron Bay, Hobart and other “sea change” locales, experts say.
Baby boomers, back on track with their seachange plans, are now seeking lifestyle homes for rent or purchase in Tasmania, Byron Bay and the Bass and Surf coasts, Corelogic RP Data’s head of research Tim Lawless said.
“Investors looking for value should be looking for areas where the lifestyle buyers are going to such as Hobart and Byron Bay,” he said.
Add this to existing strong rental demand and undervalued properties, and Tasmania is an investors’ dream, Knight Frank Hobart’s Scott Newton said.
“Certainly we have had yield compression but not the same degree as the mainland because our properties are still very undervalued,” he said. “And we do not have the same level of foreign interest.”
Mr Newton said there is an increasing number of people moving to Hobart and Launceston to seek a quieter and more affordable lifestyle.
Yields still high
The demand from baby boomers, students and young families for a small pool of housing stock produce much higher yields in Tasmania than on the mainland.
“I leased a house in a Hobart to a couple who wanted to downsize for six to eight months. They moved to Hobart first to scout around and later ended in Bream Creek,” Ray White’s Ant Manton said.
“We are also seeing buyer agents in Sydney looking for investment properties for their investor clients looking at city rim areas where there is very low vacancy, at the $300,000 to $450,000 mark.”
The attractiveness of Tasmania, Byron Bay and other seachange areas for investors lies in the combination of cheaper prices and high yields.
In Byron Bay, the median unit price is $542,000 returning 6.7 per cent while in Victoria’s Bass Coast’s Wonthaggi and Hobart, for about $250,000, investors can expect yields of 5.4 to 5.6 per cent.
Compare this to Sydney’s $800,000 house price for 3.4 per cent and Melbourne’s $551,000 for 3.7 per cent.
“Property affordability here is a big big thing. What you can get here compared to Sydney and Melbourne is unbeatable,” LJ Hooker Launceston’s Col Edwards said.
Vacancy is low and rentals are solid in seachange areas.
Downsizers fuelling demand
“In Byron Bay, vacancy across the board is less than 1 per cent. Many people here are downsizing especially baby boomers who are selling their big houses in Double Bay and looking at lifestyle properties,” he said.
“And what’s interesting is we are also getting a lot of young families relocating from the cities. With technology, they can work from home.”
In Tasmania vacancy rate across all properties is 2.9 per cent, Mr Manton said.
But Herron Todd White chief executive Brendon Hulcombe cautions investors to adopt the “buyer beware” mentality.
“The property market is still reasonably fragile and people should be aware that we are connected globally. Yields might be real for now but things can get shaken up in the future especially because we are no longer isolated from the world,” he said.