Over the past 6 months we have seen a significant shift away from investors seeking the large capital gains and moving more towards an income play investment. This is not purely at the retirement aged investors, but at the younger end of the spectrum and within the SMSF’s. Investors are looking for property with higher yields and whilst this is hard to achieve within the inner city suburbs, it has pushed these investors to consider more suburban locations as well as large regional townships.
In chasing these “income play” properties, we have also seen that investors are also more open minded to alternative types of residential property investment, buying assets such as student accommodation and dual occupancy house and land packages over the more traditional off the plan apartment, townhouse or free standing home. These more alternate asset classes are showing yields from 6.2% to as high as 8.2% gross. Some of the residential home builders have realised this and are now offering dual occupancy (duel key) as an off the shelf product for investors to be able to build.
The result of this trend is putting upward pressure on prices in these secondary markets and may then slow the growth of the inner city locations as that investor pool thins. We see this trend is going to continue as the investors look to fund their increasingly expensive lifestyle and take advantage of the arbitrage that exists between yields and interest rates.