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Top five Cairns suburbs with the ‘Highest Rental Yield’

As interest rates continue to rise, its becoming more difficult for investors to invest in residential real estate that has positive cash flow potential. With extremely low vacancy rates across Tropical North Queensland the median rent for Cairns has surged a long in the last 12 months as a result investors have followed chasing the high yields.

With a grim supply pipeline, we are likely to see this trend of extremely low vacancy rates remain for the next 2-5 years. Let’s look at the top 5 suburbs in Cairns that currently have the highest median rent and break down whether investors should be putting them on shortlist.

  1. Whiterock 5.54% ($474 per week)
  2. Mount Peter 5.31% (552 per week)
  3. Bungalow 5.25% ($464 per week)
  4. Manunda 5.18% ($477 per week)
  5. Edmonton 5.12% ($474 per week)
 

 Image: White Rock, Cairns 

 

Should investors be buying in these suburbs?

When the team at Tropical Life Buyers Agency select investment properties for our clients, the property must tick 10 key investment principles/fundaments and pass 40 local data points both quantitative and qualitative.

Despite the extremely attractive rental yields unfortunately none of these suburbs currently tick the 10 key investment principles/fundamentals that make it an investment grade area we’d buy in for one of our clients. Well not yet anyway, there are 2-3 suburbs on this list that we may start to consider in the next 2-5 years and that’s Bungalow and Whiterock.

In the short-term we see better value for investors in several other suburbs across Cairns, essentially where we can buy under the suburb median house price and rent it for above the suburb median rent – that’s what we are targeting. Rather than targeting cheaper areas of Cairns like these suburbs, where the rental yields are likely to be high because of low vacancy rates and low median house price. In the wise words or Warren Buffet “When the tide goes out you’ll see who been swimming naked”. We believe this could happen to many investors that have only been attracted to the yields in these suburbs rather then looking at other critical investment fundamentals and data points.,

The team at Tropical Life see great upside potential in Whiterock given its proximately to the CBD, so it would always be a suburb with strong rental demand although for rental growth to occur the median house price must also grow. The only downside about Whiterock is that over the longer term it does not have good quality high-end stock within the suburb that could drag up the overall suburb median overtime. Whiterock will shortly hit a price ceiling and this could be problematic for rental growth.

Future rental growth and house price growth in Whiterock will be highly dependent on gentrification. Once the older established homes worth 400-500k in the suburb begin to be transformed into 700-800k homes we will then see the suburb perform very well with price and rental appreciation but right now its not happening.

It’s currently unclear to us what type of suburb Bungalow will become in Cairns and it’s largely why we have bought very little investments in this suburb. Our concern is that Bungalow has very little family appeal, because its close to the industrial precinct of Cairns. There is also a lot of medium density dwellings in Bungalow and with Cairns running out of developable land.

Image: Bungalow, Cairns 

 

Suburbs like Bungalow will become denser with townhouses and apartment complexes. If you are an opportunistic investor, then Bungalow could be a good proponent as your property may hold further development potential.

If you need help navigating the Cairns property market reach out to the Tropical Life Team.

Buyers Agent Cairns | Buyers Agent Port Douglas | Buyers Advocate Cairns | Cairns Buyers Agent.

Troyson Bassani

Owners & Head of Research

 

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