This article is from the Australian Property Journal archive
A HAWTHORN retail property has sold for $3.21 million on a record yield of 2.86% following a hotly contested auction.
Teska Carson’s Tom Maule and Michael Ludski sold the 730 Glenferrie Rd property, which comprises a two-level 211 sqm building with ground floor retail and a first floor dwelling on a 226 sqm site.
They said the sale drew more than 150 enquiries and a healthy auction crowd with seven bidders driving the price. The property was sold subject to a three year lease to a homeware and giftware retailer, at $91,718 per annum net.
“Low interest rates are forcing yield compression. You earn nothing on your money in the bank and so investors are out there chasing yield.
“Five years ago circa 5% was a tight yield but now we are regularly seeing 3% to 3.5%. What was then an exceptionally low level is now regarded as normal and we can thank low interest rates for that,” Maule said.
He said at well over 4%, the risk premium between property yields and conventional bond yields was now very attractive.
“Put an attractive risk premium together with the low cost of money and you have a very enticing investment package,” he added.
Ludski said, as expected, the property drew interest from both local and offshore investors as well as occupiers and developers looking at future options but the number of bidders was exceptional.
“That said, the number of bidders was more than we would expect under what you might call normal conditions where two, three or maybe four bidders drive the auction. With seven bidders for the second week in a row we are seeing a change in the market and that increase in competition means yields have further to fall,” Ludski said.
Australian Property Journal
