Investors chasing yield

August 17, 2015 0 Comments Ladan Jamali 1

Historically investors will discuss the capital gains that they have made from their property investment. With the strength of the market that we have seen in many locations around the country, there is concern over the amount of growth that remains. This concern, coupled with the low interest rates on an investors cash deposits, is pushing investors to look for higher yielding, and subsequently lower capital growth, from their investments to get positive cash-flow properties to fund living expenses. A trend that we have seen grow significantly over the last 6-9 months.

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.

Investor Advocate (IA) is a property agency that works with investors to help them source and secure investment property through our unique Purchasing Campaigns. In this process we work closely with them, and their financial advisors, to select property that will meet there current and future financial goals.

Leave a Comment