The top suburbs for investment units

Founder and Publisher of the Switzer Report
Print This Post A A A

The warmer months have brought with them an air of improved sentiment towrds real estate, with interest rate cuts, stock market gains and improvements in the global economic picture bringing home buyers out from the sidelines.

Mortgage lending rose by 3.8% in September, with an 8.6% rise in investment loans, data from the Australian Bureau of Statistics showed today. First home buyers were also more active, accounting for 19.3% of all loans in the month.

But while there has been an encouraging pick-up in activity, the overall market is not exactly booming. The data showed that the average home loan across the country was at $300,200, down 0.1% from a year ago.

“There is a clear recovery in place in home lending, but while loans by owner-occupiers are lifting, they certainly aren’t leaping,” said CommSec chief economist Craig James.

For investors however, there have been some stable price gains in capital city apartments as demand to live in more affordable housing within the country’s major hubs grows.

The opportunities

In Sydney, for example, a unit at Bondi Beach will set you back about $682,500 and bring in an average rent of $710 a week. It is also a suburb that has experienced stable price gains in recent years, up 5.43% in the three months to October and an average of 6.62% over the past three years. At Sydney’s more affordable end, an apartment at Vineyard costs about $154,500 while bringing in about $300 a week rent. Capital gains in the suburb are up by 4.45% in the past three months and 10.06% over the past three years.

Elsewhere, suburbs like Redcliffe in Brisbane and Fawkner in Melbourne and Yokine in Perth have all seen a pick-up.

Capital appreciation in apartments has historically lagged behind growth in that of single homes on a block of land, but factors such as a growing population, the high cost of living in many of Australia’s capital cities and demand to be close to employment, have seen apartments rise in popularity.

“Both owners and investors see apartments as serious options due to greater affordability, lower maintenance and security,” says John McGrath from McGrath Estate . “Medium and high-density living close to the city is increasingly popular. Some developers are responding to the growth in single person households by planning ‘pocket penthouses’ – several one bedroom penthouses instead of one large residence with three or four bed-rooms.”

Demand for apartments is likely to remain strong. The following Residex table outlines the top 10 suburbs by Australian capital city for buying apartments. These are ranked by the capital gains in the three months to October.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

Also in the Switzer Super Report

Also from this edition