“Gross rental yields at record lows and affordability constraints are acting as a disincentive, particularly in Sydney where the median unit price is equal to, or higher than the median house price in every other capital city.”
So said CoreLogic as it revealed its latest house price data, showing higher borrowing costs and record low rental yields slowed capital city annual property value growth to 10.1 per cent in October, down from 11 per cent in September.
Gross rental yields on houses and apartments nationally fell to record lows, with the capital city yield on houses dropping to 3.4 per cent.
By comparison, Hobart’s 5.3 per cent rental yield on houses is the best of Australia’s capital cities for houses, and on units it is matched only by Brisbane and bettered only by Darwin’s 6.1 per cent.
In Sydney, gross rental yields on houses are a meagre 3.1 per cent, though that still beats Melbourne’s paltry 2.9 per cent.
Source: CoreLogic
The median price in Sydney and Hobart also reflect very different markets: $800,000 versus $325,000.
The only capital city where home owners have seen the value of their homes move lower since the end of 2008 is Hobart, CoreLogic says.
While Hobart’s 9.4 per cent total gross yield for the year was less than half that of Sydney, going forward the Tasmanian capital and Brisbane are widely tipped to outperform.
That’s partly based on a recovery in the local jobs market. In Hobart there has been 3,331 full-time jobs created over the past year compared to full-time job losses of 4,347 since 2008.
The state’s economic recovery has pushed the unemployment rate down to match the national level at 6.2 per cent, with more Tasmanians in work than ever before on strong tourism and building industries, as well as a recovery in the forest industry.
And anecdotally, interstate investors are also forgoing Sydney to snap up two-for-the-price-of-one in Hobart and its surrounds.
Ratings agency Moody's has predicted Tasmania’s fiscal deficits will narrow considerably, and the state is forecast to move into a surplus by fiscal 2019, underpinned by ongoing high levels of GST-backed grants, which comprise 44 per cent of Tasmania's income.
The trend for better property yields outside the largest cities is also being seen in places like the UK, where rents are rising faster outside of London than in the capital.
Property website Rightmove calculates that rents have risen 1.3 per cent in the rest of the country, compared to 0.2 per cent in London, in the last three months.
The Rightmove report introduced a “total returns calculation”, identifying locations where buy-to-let investors have seen the highest returns. Ten towns in the east of England – including four in Essex – took the top spots.