Mackay minimum rental levels rise steadily: HTW residential

Between 2013 and 2017, it was a pretty tough slog for investors in residential real estate in Mackay, according to a recent Herron Todd White (HTW) residential report. 

The valuation firm took a look at rental yields across the nation. 

"The downturn in the resource sector and flow on effects to Mackay have been well documented in this column, but are important to give context in the current market," the valuation firm said. 

Rental vacancy rates blew out significantly from around 1% to a high of 9.4%, with market rental values falling between 30% and 50%.

"Investors all but left the market during this period, putting greater pressure on values of purely investment grade stock, in particular flats and units.

"However, over the past 12 to 18 months, the tide has definitely started turning," the valuation firm said. 

Rental vacancy rates have been falling over the past two years and currently sit at just below 2% with market rental values increasing throughout this period.

In fact, the rate of increase in rental values rose faster than any increase in capital values during this period, meaning yields are increasing.

This fact alone, with the prospect of increasing capital values in the medium term, is making Mackay a great place to invest at present, the report noted.

"So, what are the yields being achieved at present?

"For residential dwellings, gross yields currently sit between 5% and 6%, with the higher yields currently available on lower value dwellings," the valuation firm said. 

The HTW report suggests the minimum rental levels in Mackay have been rising steadily, allowing greater yields on these properties.

The risk is the older properties may require capital expenditure and repairs and do not reap the depreciation benefits on more modern properties.

"In terms of gross yields only, the highest yields currently available are with units. Unit values fell significantly in the downturn and have only started to increase slightly since," the valuation firm said. 

For example, an older style walk up two-storey attached unit in close proximity to the CBD can still be purchased for under $150,000, with some recent sales as low as $110,000.

These units can command a rental of between $180 and $200 per week giving gross yields of between 7% and 8.5%.

"Just a word of caution, these rates are gross yields only and do not take into account the higher costs of insurance and body corporate levies in Mackay or rates payable."