Australia’s top suburbs for investment property

These are the best places to reap high returns

Australia’s top suburbs for investment property

The current economic climate has created a market that is conducive to property investment – and if done right, investing in real estate can provide property owners a great opportunity to build wealth and secure their financial future.

However, investing in real estate is a complex process that requires careful planning and unyielding commitment. The key is picking the property that is ripe for investment. Here are five indicators of a good investment property, according to experts.

1. Location

A property’s location has a major impact on the rental demand, tenant quality, and rate of return. If the property is in a high-growth market, rental price, tenant quality, and the property’s value will likewise increase. Some good indicators of a high-growth area include large and rising population, proximity to public amenities, vibrant job market, low crime rate, accessibility of public transportation, favourable taxes, and affordable insurance rates.

Lloyd Edge, director and founder of buyers’ agency Aus Property Professionals, advises investors to look for areas that have “all the fundamentals of good growth.”

“Find properties near universities, hospitals, and school catchment zones, or areas with a higher-than-average median income for a city and with an average of two incomes within the household,” he said. “This provides much better stability, as there is less chance of renters not being able to pay if there are job losses. Many people don’t look at that avenue when buying properties.”

2. Condition of the property

When selecting a rental property to invest in, experts also recommend conducting a thorough home inspection to see if the property is in a sturdy condition and tenant-ready as repair and maintenance expenses can eat into an investor’s funds and can have a huge effect on cash flow.

Property marketplace Urban.com.au noted the importance of having a property inspection checklist to make the process faster and easier. 

“A homebuyer inspection list isn’t just there to ensure everything is ready for you to move in, it’s also to alert you to any significant issues that may mean you shouldn’t be buying the property at all,” the company wrote in a blog post. “This is particularly pertinent if you are dealing with a potential investment property as the new tenants will be coming to you with any issues.”

3. Number of listings and vacancies

An area with a low number of listings and vacancies shows a strong rental market. Low vacancy rates also allow property owners to raise rental prices to boost returns.

4. Positive cash flow

An investment property should be able to generate a strong positive cash flow every month. This means the income a property generates is more than enough to cover everything that the property owner puts into it.

Over time, the value of the rental property may go up, along with the rent, especially if the property is in a high-yield area. This means cash flow can also improve, leading to positive cash flow, which can then be used to finance more investment properties – a strategy that Edge advocates.

“You need to understand how each property will get you into the next property,” he said. “You will need to build up from that by purchasing other properties that have a clear purpose and their own strategy to achieve that long-term goal and acquire financial freedom at the same time.”

5. Potential for capital growth

Apart from cash flow, investors should be able to generate profit from the rental property. The most common metric used to determine profit is cash on return because it factors in how the investment property is being financed. Experts say a good rental property can make cash on return of about 8% or more.

What are Australia’s top suburbs for investment properties?

The key to finding high-yield rental properties is to look for suburbs that have both affordable property prices and relatively high rental returns. These areas are typically located outside major capital cities, which often have expensive housing and lower yields.

Your Investment Property, Mortgage Professional Australia’s sister publication, uses the latest industry data to identify suburbs that deliver the highest yields across Australia. Here are the top suburbs in the country based on rental yield according to data gathered by the consumer intelligence website.

New South Wales

Suburb

Property type

Median price

Rental yield

Lightning Ridge

House

$82,500

13.46%

Bourke

House

$103,750

13.03%

Broken Hill

House

$120,000

11.70%

Cobar

House

$121,000

11.60%

Narooma

House

$567,500

10.90%

Source: Your Investment Property, June 2021

Victoria

Suburb

Property type

Median price

Rental yield

Point Lonsdale

House

$895,000

11.04%

Warracknabeal

House

$149,000

7.85%

Nhill

House

$160,000

7.56%

Moe

Unit

$145,000

7.35%

Portland

Unit

$195,500

7.05%

Source: Your Investment Property, June 2021

Queensland

Suburb

Property type

Median price

Rental yield

Blackwater

House

$140,000

10.86%

Point Lookout

House

$830,000

10.65%

Holloways Beach

Unit

$157,000

10.43%

Cloncury

House

$170,500

10.32%

Manunda

Unit

$133,750

10.30%

Source: Your Investment Property, June 2021

South Australia

Suburb

Property type

Median price

Rental yield

Solomontown

House

$107,500

10.64%

Port Pirie West

House

$110,000             

9.57%

Normanville

House

$385,000             

9.45%

Crystal Brook

House

$177,500

8.79%

Port Augusta

House

$145,000

8.61%

Source: Your Investment Property, June 2021

Western Australia

Suburb

Property type

Median price

Rental yield

Derby

House

$141,250

11.78%

Kambalda West

House

$117,000

10.67%

Newman

House

$250,000

10.40%

Merredin

House

$144,500

10.08%

Moora

House

$150,000

9.71%

Source: Your Investment Property, June 2021

Tasmania

Suburb

Property type

Median price

Rental yield

Zeehan

House

$122,500

9.98%

Rosebery

House

$105,000

9.16%

Queenstown

House

$112,500

8.32%

Acton

House

$214,000

6.80%

Ravenswood

House

$220,000

6.38%

Source: Your Investment Property, June 2021

Australian Capital Region

Suburb

Property type

Median price

Rental yield

Denman Prospect

House

$539,950

8.19%

Chifley

Unit

$312,000

7.83%

Curtin

Unit

$267,000

7.30%

Lyons

Unit

$286,500

7.08%

Hawker

Unit

$314,000

6.71%

Source: Your Investment Property, June 2021

Northern Territory

Suburb

Property type

Median price

Rental yield

Tennant Creek

House

$230,000

9.58%

Katherine East

House

$310,000

7.88%

Johnston

Unit

$275,000

7.56%

Sadadeen

House

$375,000

7.35%

Darwin City

Unit

$318,500

7.35%

Source: Your Investment Property, June 2021

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