With so many varied locations in Australia, it can be overwhelming finding the right suburb to buy your investment property in. Every investor wants to make the most of the potential for capital gain and rental yield – so how do you pick the best suburb for property investment?
PLEASE NOTE: Due to an ever-changing property clock, and the unpredictability of the market, it is impossible to concretely determine whether one suburb will perform better than another for every investment property. Because of this, rather than giving over-generalizations telling you where to invest, this article will supply the tools you need to notice several key signs of future growth in a suburb in Australia that you can apply to your property investment strategy.
Characteristics of the Best SuburbS for Property Investment
Low Unemployment Levels
When looking for a rental property, search for areas with low unemployment levels. The more stable the employment of your prospective tenants, the more stability there will be in your rental income. In February 2021, the national average unemployment rate was at 5.8%, so, aim for a suburb with an unemployment rate well below this figure.
Low Vacancy Rates
Low vacancy rates in an area indicate an elevated level of demand for rental properties, and potentially an undersupply of quality housing, which in turn raises the value of your property and can increase your potential rental yield.
In addition, having less available rental properties in a suburb means you are likely to receive more applicants for occupancy and can select the most suitable tenants. Look for low vacancy rates – below 2% – and avoid rates above 4%.
Higher Than Average Income
A higher average income in the suburb of your investment property will mean higher discretionary money for your potential tenants, and the possibility to charge higher rent. Suburbs with a higher mean household income also tend to have a better reputation, appear more desirable to prospective occupants. In addition, a more affluent tenant may be more likely to take diligent care of the property by hiring a cleaner or a gardener.
You can find a useful tool with interactive heatmaps to view affluence levels and other relevant demographics here.
Low Percentage of Existing Rental Properties
The lower the percentage of existing rental properties in an area, the higher the demand there will be for your property. Higher demand means smaller wait periods between tenants, as well as the ability to raise the rent to increase your weekly yield. In addition, there will be less property owners to compete for tenants.
Common Family Structures
It’s important to consider what kind of family structures live in a particular suburb, and whether they will make the ideal tenant for your investment. For example, is the area is popular among families with young children, and you are building a 2–bedroom townhouse, you may have more difficulty finding a tenant for the home.
However, in some circumstances, this may be filling a gap in the market that is predicted to soon be of high demand – perhaps due to new transport options or workplaces opening in the area that will attract a different kind of household. Speak to your property investment advisor about what strategy will work best for you.
Strong Nearby Transport Options
Every tenant needs to be able to get around! Look for suburbs that are close to, but not directly next to, major transport options such as bus or train stations or highways. Be wary of the proximity to the nearest airport, however, as many tenants will be turned away if there is significant overhead noise.
What Are the Best Areas in Australia to Invest Right Now?
To demonstrate how to use these characteristics to decide what area to invest in, here are some example of current strong contending locations in the Australian property market. These are
A smaller, coastal town 250km north of Brisbane, Hervey Bay has been gaining traction in the property investment world. A few of the contributing factors to its recent and continuing success include:
- High predicted population growth (set to increase from 102,000 to 164,000 residents over the next 20 years)
- Strong transport options (efficient road, air and rail corridors to major employment centres)
- Affordability (amongst the most affordable in Australia, including a very low price of living)
The Sunshine Coast has become a popular hub for Australians from Sydney and Melbourne to relocate to since COVID-19 changed the outlooks of many people on their work and lifestyles. High rental yield and high capital growth are predicted for this area, thanks to a number of factors, including:
- Extreme population growth (set to reach 500,000 residents by 2041 – an increase of 8,300 per year, requiring a total of 71,230 dwellings)
- Additional updated infrastructure (including IBN connectivity, health and business precincts, and a SmartCity Program)
Stay Open to Different Suburbs
It is surprisingly easy to become set on a suburb – perhaps you read about it in this article, saw it in the news, or heard a friend mention that their property has done well there. However, it is strongly recommended that if you are looking for an investment property, you remain open to multiple location options.
As you search for a profitable investment property, be sure to consider each of the above aspects to help you find a location that is right for your strategy. Your property investment advisor may suggest several different properties in different areas, and it’s important to think critically about the pros and cons of each to ensure you get the best possible outcome.
Speak to your property investment advisor if you’re unsure – with all the necessary training and years of personal experience, they will be your most valuable tool to analyse your options.
Who Can Help Me Find the Best Suburbs in Australia for Property Investment?
If you are yet to find a property investment advisor, why not consider Prospa Property Advisory? All our advisors are QPIA certified, and our goal is to ensure you buy the right property to achieve your goals.
If you’re interested in discussing how we can help you, call 1300 660 335 or email email@example.com.