Which Canberra suburbs are delivering landlords a return on investment?

It’s no secret that Canberra is the most expensive city in which to rent a house, but which of its suburbs are delivering a return to investors?

The latest Domain Rent Report revealed that investors would have to cross the border to Queanbeyan to get a return. 

The suburb recorded the highest median gross rental yield of all Canberra suburbs (and yes, Quangers are most certainly still considered Canberrans) at 6.47 per cent for a unit. The median rent price for a unit there was $420 a week, up a significant 26.7 per cent year-on-year.

But for those wanting to invest within the ACT borders, it would be best to look at a unit in Hawker, where the median yield was 6.44 per cent. The median unit rent there was $480 a week.

Rounding out the top three were units in Mawson, where the median yield was 6.36 per cent. The suburb recorded a median unit asking price of $500 a week.

Another six ACT suburbs delivered median gross rental yields of six per cent or more, including Holt, Chifley, Macquarie, Phillip, Greenway and Bruce.

Boris Teodorowych of Boris Property said units in the outer ACT suburbs held great appeal to investors as they helped to maximise rental yield.

“The buy-in price is usually lower and many of the older-style properties don’t incorporate lifts, pools [or] other costly services and amenities,” he said.

“This further reduces body corporate fees and levies and – typically – rates and land taxes are lower.”

Teodorowych said all these helped to maximise the net yield – what’s left after all costs are deducted. The unit specialist added that interstate investors had been showing strong interest in Canberra one-bedroom apartments because “the cost equation adds up”.

“They represent real value at, say, $550,000 compared to, maybe, $800,000 in Sydney,” he said. “They’re a great option for a first-time investor.

“They will likely get $550 a week in Canberra, but might only get $600 a week rent in Sydney – the yield is so much better.”

Teodorowych said many investment units were being bought to service the short-term rental market.

By contrast, the suburbs that recorded the highest median gross rental yields for a house were Moncrieff at 4.63 per cent with a median asking rent of $685 a week; Lawson at 4.33 per cent and $660 a week; and Macgregor at 4.28 per cent and $628 a week.

Tim Burke of Luton Properties Weston Creek and Molonglo Valley said that, when it came to detached homes, investors were generally playing a longer game.

“They tend to focus on capital growth rather than rental yield – homes generally appreciate at a faster rate than units,” he said.

“Holding costs are another factor. Investors pay the whole cost of land tax, but unit owners only pay a representative fraction.”

Burke said the median gross rental yield for houses could be lower because there was a limit on what tenants might be prepared to pay.

“For example, an investor might only be able to get $600 to $700 a week on a $1 million property, whereas they could get the same on, say, a $650,000 two-bedroom apartment,” he said.

The Domain report also found Canberra was the most expensive city in which to rent a house, while units were the second most expensive, after Sydney.

The city’s overall median asking rent for a house was $690 a week, a record figure that remained unchanged over the quarter and year. Meanwhile, Canberra units were $550 a week, down 1.8 per cent over the quarter but up slightly by 1.9 per cent over the year.