property real estate billy dounis

Have you considered investing in Australia’s ‘smaller’ capital cities?

It’s no secret that property prices in most of Australia’s largest capital cities have seen unprecedented growth of recent years, in particular in Sydney, although it has been suggested by RP Data’s Research Director Tim Lawless that future growth may be better outside of the large capitals.

Although the capital markets have proven strong capital growth rental yields are continuing to fall, Lawless notes that yeields in Sydney are currently so low they are on track to fall 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.

“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 contacting 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.

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