Measuring Rental Yields in Holiday Locations can be tricky – South Coast NSW

The south coast is currently seeing renewed interest

from retiring baby boomers and younger families making a lifestyle decision to head out of Sydney. Population and property values from Wollongong to Kiama have been rising for some time, uplift is in various stages in various parts of the Shoalhaven such as Nowra, Bay and Basin and the beach hamlets.

Investors are also seeking the relative affordability (compared to Sydney) of quality property close to the water. The ripple effect is moving out from Sydney, with yields sometimes stronger than many Sydney suburbs but it pays to do your research.

Regarding rents,

there are are a wide range of price points and rental returns along the coast as every micro market has its own specific drivers. Part of my role as a specialist Buyers Agent is to understand the demand, where local owners and tenants want to live most. Risk issues to be aware of include things such as flood and bushfire zones, local industrial impacts, public housing estates, public transport, traffic noise, easements, covenants and other factors too.

Along with the physical factors it is essential to understand the numbers, yields are part of the picture but so are vacancy rates, combining the two helps get a better picture of the return an investment can generate and how quickly it would be to relet a property if your tenant leaves.

One essential thing

to check with seemingly high yields in coastal locations is to verify whether the advertised rates refer to long term leasing or short term holiday rates. A property advertised for holiday stays at over a thousand dollars per week can effect the median and average yield curve making an advertised yield look higher than it actually is. Some properties are also leased long term fully furnished which further complicates the yield measurement. If a published rate looks too good to be true, it probably is. Doing your research or checking with a local expert will always help make more realistic predictions and avoid disappointment.

Matt Knight – South Coast Buyers Agent

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