Professor Chris EvesQUT

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 StockRented: House

Semi-detached, Units

Other dwelling

Not stated

Real estate agent 506,479 155,458 375,475 5,260 522 1,043,194 State or territory

housing authority 150,008 65,121 90,886 447 234 306,696

Person not in same household(b) 311,150 62,344 108,351 7,162 286 489,293

Housing co-operative/community 25,927 9,353 15,188 520 176 51,164

Other landlord type (c) 66,624 10,161 15,722 18,794 254 111,555

Landlord type not stated 41,909 6,468 11,492 2,116 58 62,043

Total 1,102,097 308,905 617,114 34,299 1,530 2,063,945 Source Australian Bureau of Statistics (ABS): 2010

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: 2007-2008

City Average House Price 12 Month Change

Sydney, NSW $595,745 + 12.1 %

Melbourne, Vic $517,756 + 18.5 %

Brisbane, Qld $445,562 + 7.7 %Adelaide, SA $427,109 + 2.4 %

Perth, WA $512,178 +8.7 %

Source: Living Australia 2009

Brisbane Median House Prices: 2007 to 2009

2007 2008 2009Brisbane 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

9.80 1.19

Brisbane Local Government Area

8.17 0.31

Capital Return PerformanceCapital Return (%) 2008

Volatility (%) 2008

Risk/Return Ratio 2008

Capital Return (%) 2009

Volatility (%) 2009

Risk/Return Ratio 2009

Low Socio-Economic Suburbs

11.74 3.13 3.75 2.95 3.47 0.85

Middle Socio-Economic Suburbs

10.02 6.12 1.64 0.12 7.74 0.02

High Socio-Economic Suburbs

12.62 11.14 1.13 -11.86 11.81 -1.00

Analysis 54 Brisbane Suburbs•Suburb location•Suburb value

Brisbane Geographic Locations: Median Price and Weekly rent

2007 2008 2009

Median Price ($000)

Median Rent

Income Return %

Median Price ($000)

Median Rent

Income Return %

Median Price ($000)

Median Rent

Income Return %

South 491 $373 3.95 $554 $413 3.87 $538 $415 4.01

West 607 $361 3.44 $666 $395 3.40 $625 $406 3.58

North $644 $393 3.17 $726 $460 3.29 $677 $467 3.59

Price and Income Returns 2007 to 2009

2007 2008 2009

Median Price

Med. Rent

Income Return %

Median Price

Med. Rent

Income Return %

Median Price

Med. Rent

Income Return %

Low Socio-economic $331,014 $307 4.83 $369,869 $336 4.73 $378,685 $345 4.74

Middle Socio-economic $515,737 $351 3.54 $567,382 $391 3.58 $568,053 $391 3.58

High Socio-economic $775,237 $450 3.02 $873,079 $519 3.09 $769,316 $532 3.59

South East Queensland: Brisbane Regional

Regional Brisbane 2007 2008 2009

Median Price

Median Rent

Income Return %

Median Price

Median Rent

Income Return %

Median Price

Median Rent

Income Return %

Gold Coast 475000 375 4.11 490000 390 4.14 480000 400 4.33

Ipswich 285000 250 4.56 315000 270 4.46 320000 270 4.39

Logan 315000 280 4.62 343000 310 4.70 350000 320 4.75

Sunshine Coast 440000 340 4.02 465000 360 4.03 455000 360 4.11

Redland 415000 320 4.01 440000 350 4.14 450000 350 4.04

Queensland Rural LocationsQLD Rural 2007 2008 2009

Median Price

Median Rent

Income Return %

Median Price

Median Rent

Income Return %

Median Price

Median Rent

Income Return %

Bundaberg 269000 245 4.74 280000 250 4.64 275000 260 4.92

Central Highlands 320000 360 5.85 317500 380 6.22 340000 380 5.81

Gympie 272000 220 4.21 286000 240 4.36 285000 250 4.56

Mt Isa 315000 390 6.44 335000 450 6.99 323000 420 6.76

South Burnett 187000 210 5.84 220000 230 5.44 236000 225 4.96

Toowoomba 255000 230 4.69 261500 240 4.77 280000 255 4.74

University Suburbs

2007 2008 2009Median Price ($000)

Median Rent

Income Return %

Median Price ($000)

Median Rent

Income Return %

Median Price ($000)

Median Rent

Income Return %

University Suburbs 609 $383 3.42 $665 $429 3.50 $626 $432 3.65

Summary: Total returns: 2007-2009 Av annual total return 2007-

2009Brisbane South 8.93Brisbane West 5.24Brisbane North 6.35Brisbane Low value 12.11Brisbane Med Value 8.64Brisbane High Value 3.61Brisbane Regional 7.54QLD Rural 9.62Brisbane university 4.11

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.

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•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