New data on Sydney suburbs with the largest returns for investors challenges the concept that high-yield suburbs often means low capital growth.
Property research company Onthehouse.com.au has released a list of the top 10 yielding suburbs for Sydney’s greater metro area – with Mount Druitt topping the chart.
Onthehouse said the list defies the perception that high rental yields are associated with areas that experience low capital growth.
Each suburb on the list, with the exception of Surry Hills, recorded a yearly growth rate greater than the collective Sydney metro region – 12.90 for units and 15.09 per cent for houses in the year ending March 2015, according to Onthehouse.
The Sydney metro suburbs which recorded the highest rental yields in March were largely concentrated in Sydney’s west and southwest, with the inner-city suburb of Surry Hills being the notable exception.
Onthehouse.com.au market analyst Eliza Owen said investors should look past Mount Druitt’s negative reputation, the subject of much media attention lately, and instead look at the figures on offer.
“Smart investors will look past the media buzz and realise Mount Druitt delivered the best rental yield in Sydney, according to our March data, as well as strong capital growth over the past year,” she said.
“The relationship between capital growth and rental yield tends to be inverse, usually due to the inelasticity of rental income coming from wages that are not increasing at the same rate as dwelling growth rates, along with long contract periods for tenants and landlords between negotiations.”
In addition, she said, Sydney can still offer property buyers solid investment prospects.
“Despite an extended housing boom in Sydney, the data shows that there are still suburbs where investors can achieve good capital growth, strong rental yields, and all for a relatively affordable value – that is, properties that have an affordability indicator of less than 10 times the suburb income.”
The top 10 rental suburbs in the greater Sydney metro region can be seen below: