Presentation on theme: "Professor Chris Eves QUT Maximising investment performance in residential property: A Brisbane case study."— Presentation transcript:
Professor Chris Eves QUT Maximising investment performance in residential property: A Brisbane case study
Residential Home ownership in Australia Residential rental property ownership Public and social rental property
Australian Residential Rental Stock
Why Australians invest in residential Property Long term capital gain Something for the children Taxation benefits (negative gearing) Rental income Possible future home Capital gain Unable to sell
Research Objectives Assess the variation in income and total returns Demonstrate the problems associated with Capital City median house price guides Determine the impact of property location on rental income returns
Australian Capital cities: Average House Price and Capital return: CityAverage House Price12 Month Change Sydney, NSW$595, % Melbourne, Vic$517, % Brisbane, Qld $445, % Adelaide, SA$427, % Perth, WA$512, % Source: Living Australia 2009
Brisbane Median House Prices: 2007 to Brisbane Statistical Division $382,500$420,000$425,000 Brisbane Local Government Area $453,000$490,000$491,500
Brisbane Residential Property Capital Returns 2008 Capital Return (%) 2009 Capital Return (%) Brisbane Statistical Division Brisbane Local Government Area
Capital Return Performance Capital Return (%) 2008 Volatility (%) 2008 Risk/Return Ratio 2008 Capital Return (%) 2009 Volatility (%) 2009 Risk/Return Ratio 2009 Low Socio- Economic Suburbs Middle Socio- Economic Suburbs High Socio- Economic Suburbs
Analysis 54 Brisbane Suburbs Suburb location Suburb value
Brisbane Geographic Locations: Median Price and Weekly rent Median Price ($000) Median Rent Income Return % Median Price ($000) Median Rent Income Return % Median Price ($000) Median Rent Income Return % South491$ $554$ $538$ West607$ $666$ $625$ North$644$ $726$ $677$
Price and Income Returns 2007 to Median Price Med. Rent Income Return % Median Price Med. Rent Income Return % Median Price Med. Rent Income Return % Low Socio- econom ic$331,014$ $369,869$ $378,685$ Middle Socio- econom ic$515,737$ $567,382$ $568,053$ High Socio- econom ic$775,237$ $873,079$ $769,316$
South East Queensland: Brisbane Regional Regional Brisbane Median Price Median Rent Income Return % Median Price Median Rent Income Return % Median Price Median Rent Income Return % Gold Coast Ipswich Logan Sunshin e Coast Redland
Queensland Rural Locations QLD Rural Median Price Median Rent Income Return % Median Price Median Rent Income Return % Median Price Median Rent Income Return % Bundaberg Central Highlands Gympie Mt Isa South Burnett Toowoomba
University Suburbs Median Price ($000) Median Rent Income Return % Median Price ($000) Median Rent Income Return % Median Price ($000) Median Rent Income Return % University Suburbs 609$ $665$ $626$
Summary: Total returns: Av annual total return Brisbane South8.93 Brisbane West5.24 Brisbane North6.35 Brisbane Low value12.11 Brisbane Med Value8.64 Brisbane High Value3.61 Brisbane Regional7.54 QLD Rural9.62 Brisbane university4.11
Conclusions A single measure of residential property performance based on capital city median house prices only provides an indication of actual residential return performance for that location. A suburb analysis is more informative for an investor considering residential property as an investment asset.
This study has confirmed that the rate of return for residential property is dependent on the actual location of the property and income return is not a factor of house price alone but the weekly rental.
Rental houses in lower value locations consistently outperform higher value areas in respect to total return. This is particularly the case in respect to residential property in regional or rural locations. However, these higher income returns are based on lower median prices and subsequently lower capital returns.
However, the study does show that in major urban areas, the total return from residential property in lower socio-economic value suburbs in Brisbane have outperformed all other Brisbane locations on an income and total return basis. This shows that residential property investment in lower socio- economic areas will provide the investor with a higher rate of return than residential property investment in higher value locations.
The study also shows that residential rental property close to a university will provide a higher income return than similar value suburbs not close to a university. However, this higher return is based on the rental property being leased