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Investors 'to return'

Wednesday, 6th April, 2011

By Andrew Robertson

Property investors will again be "running an eye over" Broken Hill in the not too distant future, according to housing market researcher Residex.

A combination of falling house prices and rising rental yields would soon make the city attractive to city-based investors looking for properties they can positive gear, CEO John Edwards said yesterday.

The prediction comes as Residex released its latest property market figures which show a large decline in property sales volume across regional areas of NSW.

Figures show the median rent for a house in Broken Hill rose by over 22 per cent in the last 12 months; at the same time the median house price has fallen by about 10 per cent.

The median rent at the end of February was $215 a week, representing a yield of 7.7 per cent, which is above the city's 20 year average of 7.27 per cent.

Mr Edwards said the yield rate was almost at a tipping point for investors.

"When rental yields exceed the cost of borrowing you are going to see more investment activity," he said.

"Rental yields are very attractive compared to the rest of Australia and investors will be running an eye over the city in the not too distant future."

While positive geared property is set to once again make the city attractive to investors, a number who bought in several years ago, when prices were still rising, have been burned.

Ray White Real Estate said last month that it had won eight tenders for the auction of mortgagee repossessions and all were owned by out-of-town investors.

Mr Edwards said there was a simple explanation as to why the bottom did not fall out of the housing market soon after Perilya retrenched 440 workers in late 2008.

"In mining towns when there is disruption people don't sell properties ... they will hang on to properties for as long as possible."

Mr Edwards said since peaking in late 2007 - when 63 properties sold in October - there has been a gradual slowdown in house sales and were now below 20 a month.

"Now what that is saying is there's stock in the market."

The slowdown has eventually led to a fall in prices. Mr Edwards said the median house price in Broken Hill has fallen by 10.2 per cent since peaking at $162,103 in April last year.

But he believes prices won't go much lower, if at all.

"My guess is it's at the bottom."

While sales in all regional areas of NSW have slowed, the biggest decline was recorded was in Wollongong, with a decrease in sales of 58 per cent.

"What is most surprising here is that there was growth in this market, suggesting that the slowing sales activity is more about lack of supply rather than a decrease in demand," Mr Edwards said.

He said houses on the South Coast between Wollongong and Sydney were reasonably affordable and had done well with minimal reductions in sales and growth.

"This is likely to continue as it is within commuting distance to several CBDs and it is more affordable for families than Sydney itself."

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