Alice Springs continues to be a strong investor market in the Northern Territory despite recording a drop in sales activity, according to the latest market report by Herron Todd White (HTW).
Will Johnson, Northern Territory local expert at HTW, said roughly 53% of homes in Alice Springs are rental homes owned by investors, surpassing the Australia-wide figure of 30.9%.
"Many of these properties are tightly held given the good rental returns and lack of incentive to sell, taking into consideration the recent history of minimal or negative capital gains," he said.
The high share of investment property in Alice Springs could reflect its transient population, who prefer the flexibility of renting. The typical investor profile in Alice Springs is a single or couple who either currently live in the town or have, at some stage, lived in Central Australia.
However, Johnson said the lack of capital gains and the "sheer isolation" of the place could be significant factors why others are reluctant to invest in Alice Springs. While a 6% return is not unusual in Alice Springs, Johnson said the town is not an attractive location for would-be investors who have no connection with the area.
"On the face of it, rents paid in Alice Springs are considered higher than comparably-sized towns in the eastern states, commensurate with the higher-than-average market value of dwellings here," he said.
Over the June quarter, sales of detached homes in Alice Springs declined by 11%. Still, it recorded a 3.2% median price growth to $471,500.
In terms of unit sales, activity in the market went up by 11.1%. The median value of apartments in Alice Springs rose by 3.2% to $337,500.
Quentin Kilian, CEO of the Real Estate Institute of Northern Territory, said the territory continues to have a very active rental market.
"One of the strongest points is for the investor market, where rental yields remain very strong. Alice Springs has recorded strong rental yields with 5.6% on houses and 6.2% on units," he said.