A new report from a property investment consultancy shows what investors can get from regional Western Australia, which provides rental yields as high as 10 per cent, among others.
Momentum Wealth’s Residential Regional Property Report: Western Australia looked at three major Western Australian regions — Goldfields–Esperance, Pilbara and South-West — to determine the areas that are beneficial and harmful to an investor’s portfolio.
The Pilbara region has seen property prices drop sharply, according to Momentum Wealth, with average house prices in Port Hedland, for example, dropping from more than $1.2 million in the resources construction boom in 2013 to less than $400,000 in 2017.
Damian Collins, Momentum Wealth’s managing director, said that those who purchased at the height of the boom faced losses, but the conditions allowed for opportunistic investors who could take on risky environments.
Post-boom, the market picked up between 2014 and 2016, and now can be considered quite profitable when looking at rental yields.
“House prices in these mining town are unlikely to reach the highs seen during the resources construction boom in the near-to-medium term, if ever again, but prices are now below replacement cost in some towns and yields are very high,” Mr Collins said.
“The main benefit of the Pilbara is the high rental returns on offer, with rental yields rising back up to between 7 [and] 9 per cent in some towns, which is similar to levels seen during the resources construction boom.”
Port Hedland, Karratha and Newman were identified as key suburbs in Pilbara, offering rental yields of 8.1 per cent, 7.9 per cent and 10.9 per cent, respectively.
According to the report, the South-West region is a hotbed of tourism, with a “vibrant culture of food, wineries, breweries, coast and countryside”. Therefore, using short-term letting services can allow for investors to maximise their returns further.
“In the South-West, the growing demand from people seeking a sea/tree change will help underpin capital growth, while investors can also take advantage of the region’s burgeoning tourism market and use alternative strategies, such as short-stay websites like Airbnb, to boost rental yields."
Key suburbs in the South-West region include Bunbury, Busselton, Dunsborough, Margaret River and Collie, each offering rental yields of 4.8 per cent, 4.5 per cent, 4.1 per cent, 4.4 per cent and 6.4 per cent, respectively.
Despite being post-boom, Goldfields–Esperance is still reliant on the resources industry, mining gold, copper, nickel and lithium.
“Meanwhile, the Goldfields–Esperance region is benefiting from a strong gold price as well as the growing interest in lithium, a key ingredient in batteries used for smartphones and to store energy from wind and solar farms.”
Due to its reliance on mining as well as lacking any lifestyle hotspots, the said region has been flagged as an area for caution among investors.
Hotspots in the Goldfields–Esperance region include Kalgoorie and Boulder, Coolgardie and Esperance, offering rental yields of 5.3 per cent, 6.8 per cent and 5.2 per cent, respectively.
Due to the risk associated with the three regions, Mr Collins has recommended for new investors to build up some experience before venturing into regional Western Australia to capitalise on high rental yields.
Mr Collins warned: “Investing in regional locations isn’t typically suited to first-time investors, and is a better proposition for more experienced investors who have a portfolio of existing residential properties.
“With adequate research and careful decision making at the right stage of one’s investment journey, regional property can prove to be a good investment and generate wealth through income-earning and capital-growth avenues.”