June 15, 2008


Aussie properties offer lower prices, higher returns

Values in major cities are set to double every seven to 10 years on average

By Chia Yan Min

Luxury projects on offer in the Gold Coast include the Circle On Cavill, a waterfront project touted as Australia's tallest twin towers. -- PHOTO: SUNLAND GROUP

More Singaporeans are going Down Under in search of viable property investments - and for good reasons.

Singaporeans are cashing in on a market where prices of equivalent properties are cheaper compared to l options here, and returns on investment are high.

The average capital growth rate in major Australian cities is about 7.7 per cent, meaning properties double in value every seven to 10 years on average. Rent yields in Australia are about 5 per cent on average.

Property values in major cities such as Sydney, Melbourne and Brisbane are also set to increase as they are currently facing net immigration, rising demand for housing and a housing supply shortage.

'Australia is not building houses fast enough and unless locals start living in tents, demand is set to continue rising,' said Mr Sean Parker, director of sales and marketing at JL Property Group.

Property agents are especially optimistic about growth in the Sydney market. Mr Parker described Sydney as a market 'primed for growth'.

Rents in Sydney rose 24 per cent last year due to a supply shortage. Rent yields in Sydney are currently at an average of 4 to 6 per cent.

Melbourne, another popular location, is seeing rapid property price escalations, with prices increasing by as much as 30 per cent over the past 18 months, driven largely by the owner-occupier market.

This is due to the location of several reputable universities in Melbourne.

Despite this, properties located a relatively short 4 km away from Melbourne's central business district are obtainable for an affordable A$500 to A$600 per sq ft, or about S$650 to S$780 per sq ft.

Investors looking for an alternative to these bustling cities might consider the more laid-back Gold Coast in Queensland, one of Australia's major tourist attractions.

While average rent yields are similar to the rest of Australia at about 5 per cent, rental prices escalate during peak tourist periods, for example during the Formula One season, said Mr Jeremy Thoo, general manager of Austpac International.

'Returns on properties in the Gold Coast are more cyclical and volatile compared to cities like Sydney and Melbourne, where renters will lease the property for longer periods. Tourists usually lease for about a week at most,' he said.

Recent high-profile luxury projects in the Gold Coast include the Circle On Cavill, a waterfront project launched last year by the Sunland Group. Touted as 'Australia's tallest twin towers', prices start from A$499 per sq ft, or about S$649 per sq ft.

Mr Thoo advises investors to consider whether they feel capital growth or returns on investment is more important before making a choice.

'Cities like Sydney are the equivalent of districts nine and 10 here,' he said. 'Properties there appreciate in value rapidly, but might have lower rent yields due to their higher cost. However, a property in a more suburban area like Darwin can have very high returns.'

Mr Thoo points out that the Australian market offers investment options such as serviced apartments, which are not available locally. As these are often rented to hotel chains, they offer higher returns than typical residential apartments.

He also notes that apartments tend to have higher rent yields of about 4 to 6 per cent, compared to houses which have yields of 2 to 4 per cent.

'Apartments are a more hassle-free investment,' he said.

One challenge Singaporeans face when investing in Australia is knowing who to trust. Mr Parker said buyers should look for property marketeers with a positive track record.

[email protected]