Property investment yields in Ballarat hover around 6%: HTW

Investors in the Ballarat residential market have been increasingly active over the past five years to the extent they would now make up around 20% to 30% in the price bracket from $100,000 to $300,000, valuation firm Herron Todd White have concluded.

The HTW November report described the demographic of the typical Ballarat investor as anyone from locals over 30 years old with a home and some disposable income to invest, to baby boomers from Melbourne and other capital cities.

"They are however all attracted to the market by the same three property investment pillars of affordability, capital growth and rental returns.

"As the Melbourne market bounded ahead over the past three years with record low interest rates, many investment properties have become out of the price range of many investors."

This has left many investors searching farther and wider for more affordable properties that deliver a more palatable rental return, closer to 6%, with the opportunity for capital growth, the HTW month in review highlighted.

"We are of the opinion that the activity in the investor market at present is sustainable in the medium term, particularly in the established and period housing markets.

"This is primarily due to the affordability of the properties which occupy this segment and the nature of the people purchasing them.

"As an example of the impact if banks raise investment loan rates, we note that an investor purchasing a $250,000 Edwardian dwelling in Golden Point with a loan to value ratio of 80% would see an increase in monthly repayments of around $30 per month.

"This would not discourage an investor.

"However in the event lending criteria tightened in such a way that a more conservative loan to value ratio of say 70% was required, an impact would be felt in the market as prospective investors would be required to compile a greater deposit to enter the market."

The report ended in saying that if investor demand dissipated we would see an increase in selling periods initially which would be followed by a softening in capital values.

The sectors hardest hit would be those where there is already a strong supply verging on an over supply.

In Ballarat this section of the market is new villa units and townhouses.