Yarraville is located just 8 km west of Melbourne and has been a shining light in terms of rental yield over the past five years.
While formally a working class area, in recent years Yarraville has become more of a trendy town. Younger impressionable tenants are paying a premium to be part of that scene and rental demand is high. The area mixes heritage, old, renovated, and new properties throughout its boarders and has all the amenities you would expect in a town this close to Melbourne.
Young families and young professionals have been a key driver for the rapid increase in house rental yields over the past 5 years and I see no slowing to the growing returns for investors (Figure 1). House rents have increased from an average of $340 p.w. to $440 p.w. over the past five years with only the higher end property market showing slower growth.
Units/apartments are not as common in Yarraville as some other neighbouring suburbs and tenant demand has been considerably less for these types of properties (Figure 2). As house rents continue to grow, unit rents will be dragged up in value also.
So should you consider investing in Yarraville? In my opinion the answer is yes, but only if you are already in a strong financial position. While the capital growth potential is exceptional for houses, the rental yield compared to the purchase is low. Buying and renovating is a great way to exploit this market and get fast returns, but it does of course require the effort and skill to do it right.
One thing is for sure though, Yarraville is one of western Melbourne’s places to live and be seen and that brings a price tag with it. I think owners in Yarraville will be very satisfied with their investments growth in 5 to 10 years’ time.