Great Rental Yields and Strong Demand in Kensington!

Apartment located in a picturesque area of Kensington
Source: Nelson Alexander

Last Saturday, I bid at my first auction for 2014.

As the day got closer, the temperature forecast got higher. I was relieved that the auction was scheduled for 10.30am, and equally relieved that my clients didn’t expect I’d be wearing a dark pinstriped suit for the event!

“…unlike the south east and the inner east, the gross rental returns can often be at the median gross rental return of 4.2 per cent. Sometimes, they even touch on 4.7 per cent.”

My assignment was to look for a two bedroom apartment in the inner hotspots including Kensington and Flemington, based on my client’s budget, desired rental returns and the obvious requirement for a property with strong appeal to the target tenant demographic of the area.

Inner North-Western Areas Beat South-East and Inner East on Rental Returns

These inner north-western pockets often feature on my list of favoured areas because unlike the south east and the inner east, the gross rental returns can often be at the median gross rental return of 4.2 per cent. Sometimes, they even touch on 4.7 per cent.

I carefully conducted a rental analysis on this property and concluded that based on the renovated kitchen and bathroom, boutique apartment nature and security entrance, my client could reasonably anticipate a rental return of around $350 per week.

An independent managing agent confirmed this analysis and armed with comparable sales figures, we set our limit and decided to go to auction.

2 bedroom property with recently renovated bathroom and kitchen
Source: Nelson Alexander

Picturesque Kensington Location with Fabulous Amenities

The auctioneer described the area well, pointing out the multiple train stations within walking distance and the sheer proximity to the city.  

Other great attributes included the vibrant cafes, bars and village-type shops on nearby Macaulay Road and Bellair Street.

What I really liked about this property was not only the fabulous amenities it offered, but also the streetscape of Bayswater Road.

With only a few blocks of boutique apartments and plenty of gorgeous, single fronted period houses on the street, it is indeed a picturesque part of Kensington.

“Among many things, I was struck by how close to the city the property actually was.”

These pretty streets running west of leafy Epsom Road would appear quite enchanting to even the fussiest of buyers.  Despite the quiet nature of these streets, street parking is not too problematic either.

Quite and leafy area that is close to the city
Source: Nelson Alexander

Passed-in Property Close to City

The bidding started slowly and to my surprise, despite two other bidders participating, the property passed in to me on my last bid of $388,000.

I walked inside with high hopes of negotiating an outperforming yield on this property and that I did – at $390,000.

While signing contracts with the vendors, we were able to quiz them about what they had loved about the property. Among many things, I was struck by how close to the city the property actually was.

We all laughed when the vendor told a story about having to walk home from the city one evening when taxis were hard to come by. It took her 50 minutes… not a simple walk in the park, but something most residents in Melbourne could not claim to be able to do.

This enviable location and outstanding yield and growth prospects made for a happy buyer on auction day.

For more information about Kensington, read our suburb profile here

Sales and Growth Chart – Kensington
Source: Price Finder

Points of Interest in Kensington, Postcode 3031

Kensington Primary School
Kensington Community High School
Kensington Railway Station
City of Melbourne