Where is the best place to buy an investment property in Australia?
Real estate has historically proven to be a reliable investment option in a world of fluctuating markets. An investment property is more than just a new asset; it's a way to secure financial freedom. However, where you should buy your next property isn’t always easy to answer. At DiJones, we’ve navigated the complexities of the Australian property market and seen first-hand how investment properties transform people’s lives. While there’s no one-size-fits-all approach, there are several key factors that contribute to success. In this article, we’ll take a closer look into what makes an investment property valuable and the best upcoming places to buy in Australia.
What is an investment property?
An investment property is a property you buy with the purpose of generating income in one of two ways: 1. Renting it out (positive cash flow). 2. Reselling it for a profit (capital growth). Buying property could mean a house, a unit, or even commercial property.
What are the benefits of buying an investment property?
There are many benefits to owning an investment property. Let’s take a look at the main reasons why people get involved. Equity-building asset Investment properties - Diversify your portfolio - Allow you to build equity over time - Are tangible assets
These benefits are cornerstones of investment strategies (not just property investments) that enable you to accumulate wealth. Traditionally lucrative The Australian real estate market has been a historically safe bet. The national median house value rose by 412% in the 25 years to 2018. If this trend repeats, Australia’s median house value will reach $2.9 million by 2043. Tax advantages Appealing tax advantages to owning an investment property is a significant benefit. For example, you can claim land tax, council rates, and water rates on tax if you rent out your property. Other tax-deductible elements include: - Interest on your home loan. - Maintenance costs. - Property agent fees. - Admin/legal costs of buying. - Home insurance It’s important to remember that owning an investment property comes with responsibilities. You need to maintain your property to protect its value. You also need to consider dealing with tenants, as this can be a time-consuming task at best and a spanner in the works at worst. Despite historical performance, property investments aren’t without risk, especially for those with less capital to begin with. In case you need a reminder, see the 2008 housing crisis. Capital is at stake, so you’ll need a long-term, patient perspective to give yourself the best chance of seeing returns. Conduct thorough research and determine your risk appetite. If you’re unsure about the intricacies of property investment, seek professional advice before making any significant investment decisions.
Best places to buy an investment property in Australia
We've compiled a list of the top five investment suburbs for potential investors to consider in Sydney, Melbourne, Brisbane, Adelaide, and Perth. How have I chosen these suburbs? My methodology focused on an assessment of the following five factors: - High potential rental yield - Strong capital growth (house price growth) - Low vacancy rates - Affordability - Growth potential Keep in mind these are merely trending investment hotspots, and I’m not guaranteeing high returns. I don’t know if these suburbs will outperform the market. Instead, I’ve picked these suburbs because they are relatively stable, show consistent historical growth, and show favourable signs concerning my methodology above. Discerning investors, take note.
1. Sydney
Sydney boasts a diverse property market with strong demand thanks to its status as Australia’s top global financial centre. Suburbs close to the CBD or at the waterfront typically offer high capital growth, but these come at premium prices. House prices skyrocketed during Covid, before bottoming out in early 2023. It’s now in a recovery phase. Sydney remains our most expensive city. CoreLogic daily home value index % change year on year (April 2024): 8.8% 1. Ashfield 2. Casula 3. Guildford 4. Minto 5. Mt Druitt
2. Melbourne
Overview: Melbourne’s dynamic lifestyle makes it a highly attractive prospect for residents and investors alike. Popular suburbs in the Melbourne property market include those that cater to its population growth and thriving healthcare and education sectors. CoreLogic daily home value index % change year on year (April 2024): 3% 1. Ascot Vale 2. Boronia 3. Brunswick East 4. Collingwood 5. Frankston
3. Brisbane
Brisbane’s property market is Australia’s third-biggest. Property prices boomed during the pandemic thanks to lower property prices (than Melbourne or Sydney). Not all Brisbane suburbs have been winners in recent years, though. CoreLogic daily home value index % change year on year (April 2024): 15.3% 1. Bellbird Park 2. Bowen Hills 3. Cleveland 4. Eagleby 5. Goodna
4. Adelaide
Adelaide is one of Australia's most cost-effective capital cities for property investment. It offers a stable property market with potential for long-term growth driven by government investments. CoreLogic daily home value index % change year on year (April 2024): 14.1% 1. Andrews Farm 2. Christie Downs 3. Elizabeth East 4. Enfield 5. Greenwith
5. Perth
Overview: Perth was Australia’s leading growth market in 2023. Investment opportunities are particularly prominent in areas undergoing urban renewal or those close to employment hubs, which promise strong rental demands and capital growth potential.
CoreLogic daily home value index % change year on year (April 2024): 20.7%
1. Balcatta 2. Banksia 3. Belmont 4. Bentley 5. Golden Bay
Investment goals & strategies
Your investment goals will significantly influence where you buy property in Australia. Are you seeking: - High rental yields? - Capital appreciation? - Both? Each city and suburb offers unique opportunities and challenges tailored to these different strategic needs. Rather than going through each potential strategy in granular detail, I’d suggest zooming out and asking a few key questions before you dive into figuring out the where and what of your investment. Ask yourself: 1. What do I want to achieve by investing in property? 2. How can I get those results? 3. What professional help do I need to get those results? Starting with these foundations should then dictate your path forward. For example:
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High rental yields - If your goal is steady income, look for properties in areas with strong rental demand and low vacancy rates, like university towns or suburbs near major employment hubs.
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Capital appreciation - Bet on future growth by finding property value increases in emerging suburbs or areas undergoing developments.
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A balanced approach - For both rental income and capital growth in your property portfolio, consider well-established areas that continue to show consistent growth and demand.
Capital cities vs. regional areas
I’ve focused on capital cities so far, but what if you’re interested in regional areas further afield? As with any variable in investment strategies, each path has pros and cons.
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CoreLogic's Regional Market Update indicates that Australia's regional property values are currently outperforming those in capital cities. As of January 2024, regional areas had a 1.2% quarterly growth rate versus a 1.0% increase in cities.
It seems like this is mainly due to a slight slowdown in capital city growth rather than an acceleration in regional markets. Also, significant gains in regional areas centre on Western Australia’s towns, especially. So, this may not be an apt assessment of the entire property landscape in Australia.
This is set against a backdrop of the safer bet to invest in capital cities due to traditional migration trends.
Data & resources for further research
Don’t make any investment decisions without first accessing and understanding the vast resources of real estate data available to you. Studying this data can help property investors spot fantastic investment opportunities and also help reassure you you’re making a data-driven commitment.
Check out these government sources, to begin with:
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Australian Bureau of Statistics (ABS): Offers extensive data on housing prices, demographics, and economic indicators across Australia.
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Reserve Bank of Australia (RBA): Provides economic analysis and research, including information on affordable suburbs and housing market trends.
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Australian Taxation Office (ATO): Useful for understanding property investment tax implications and regulations.
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State Government Websites: Many states have specific departments dedicated to housing and property that provide local market insights, zoning regulations, and development plans.
Key investment considerations
Guess what? Even after you’ve scoured the available data for insights, you’re still not done with your investment considerations.
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Take a look at location specifics: Thoroughly investigate the suburb/area you’re considering for investment. What local amenities are available to residents? Is there local infrastructure in place to support growth? are there future development plans in motion? All of these elements can impact your investment.
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Consider property type: Investing in houses or units is two different ball games with their own set of unique considerations. Which is the better choice for you that aligns with your longer-term goals and the type of tenants you are targeting?
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Affordability: Possibly the primary concern before you start the whole process - how much can you afford to invest when you factor in ongoing costs, potential rental income, and long-term investment goals? If you’re considering loan options, check out our home loan calculator to determine borrowing power.
These are the three integral elements of your property investing equation: affordability, location, and the right property within that location.
Landing on the right property with investment potential for you will depend on a decent balance of these three variables backed up by some encouraging data.
Summing up
We assume you still have that underlying drive to make a life-changing investment decision. However, we know that it can be intimidating to process all the elements you need to weigh when searching for a property to invest in.
Take your time. Don’t make rash decisions without seeking professional advice.
At DiJones, we go through every step of your investment journey. Our property management specialists prioritise your desired outcomes when it comes to property investment and will leverage our expertise in the market to help you reach those goals.
Connect with us today, and we’ll get you set up with a specialist to discuss your investment options.
Sources:
Sydney investment Metrics from Canstar
Melbourne Metrics from Canstar
Brisbane Metrics from Canstar
Adelaide Metrics from Canstar
Perth Metrics from Canstar
Other buying, selling and investing articles and resources
Guide to property investment success in NSW
Selling a house or apartment in NSW eBook
Buying a house or apartment in NSW eBook
