Powered by MOMENTUM MEDIA
realestatebusiness logo
Powered by MOMENTUM MEDIA
realestatebusiness logo
Subscribe to our newsletter SIGN UP

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

rpm logo latest

Top 5 capital city suburbs that pay for themselves

05 September 2018 Sasha Karen
capital city suburbs, investment, investing, real estate

How often are you asked about investment properties that pay for themselves? Well, now new research reveals the top five capital city suburbs that do exactly that.

According to Propertyology and its head of research, Simon Pressley, there are many capital city suburbs that have rental returns so high that investors can essentially just wait for the property to pay itself off.

“In some locations, even with a low 10 per cent deposit, the typical property is putting money back into the owner’s pocket each year,” Mr Pressley said.

“Even in suburbs where you do need to contribute, the maximum an investor will be out of pocket is around $100 per week, or the cost of a decent date night.”

Advertisement
Advertisement

In terms of self-serving properties, the research revealed that Darwin and Hobart have the best opportunities for investors, Mr Pressley said.

“Australia’s best capital city cash flow suburb is in Karama in Darwin, which is just 10 kilometres from the [CBD] and has a median house price of only $392,000,” the head of research said.

In Mr Pressley’s example of Karama, the investment will generate a positive cash flow of $3,600 per year if purchased with a 20 per cent deposit or $1,700 per year using 10 per cent.

“While Darwin’s market has been an underperformer over the past three years, investors won’t be as concerned if they own a property that’s actually supplementing their income,” Mr Pressley explained.

The research showed that, down in Hobart, there were opportunities for investors for properties under $250,000 in suburbs such as Risdon Vale and Chigwell.

“Price growth cycles are still ahead for Brisbane, Adelaide and Perth, so high cash flow options are likely to pay off sooner in terms of value gains,” Mr Pressley said.

“Fifteen kilometres south of Brisbane’s CBD, a typical house in the suburb of Coopers Plains can be purchased for just $400,000 and will be cash flow positive by $3,600 per year.

“Cedar Vale, Russel Island, Blackstone and Gailes round out Brisbane’s top five and are cash flow positive opportunities, too.”

However, the research warned against buying into a house in Coorparoo with a 20 per cent deposit, as it can cost an investor $15,000 per year.

Meanwhile, self-serving Perth property can be found between 25 kilometres tando 35 kilometres from the city.

“Typical housing in suburbs like Brookdale, Hillman, Dayton, Armadale and Medina are all under $300,000, making them very price-accessible while waiting for the next market upswing,” Mr Pressley said.

Looking to Sydney, Melbourne and Canberra, however, the research revealed no suburbs that can be cash flow positive with a deposit of 20 per cent or less.

“Even though it’s 80 kilometres from Sydney’s [CBD], the Central Coast (Wyong and Gosford) are technically part of Greater Sydney, while Medlow Bath in the Blue Mountains has a median house price of $500,000,” Mr Pressley said.

If investors want to find houses with good cash flow, they will need to expand their search to outside of the Sydney area.

“For example, a house in Lake Munmorah on the Central Coast will cost $3,093 per year to hold,” the head of research suggested.

“Compare that to somewhere like Blacktown, 38 kilometres west of Sydney. That suburb has a median house price of $740,000 and a property there will cost $11,775 per year to maintain, even if you have a 20 per cent deposit.

“The figures are even worse for Hornsby, where a median house price of $1.33 million will leave you $26,152 a year worse off.”

A similar scene can be found in Victoria, with the Greater Melbourne area offering Melton as the best place to invest into, which has a median house price of about $400,000, costs $4,000 to hold with a 20 per cent deposit and is located 40 kilometres northwest of the CBD.

“In the Yarra Ranges, the entry price for a typical property is slightly more affordable and the annual impact on the household budget could be less than $2,000,” Mr Pressley said.

“Compare those figures to somewhere like Doncaster, 17 kilometres from the CBD, where a typical house will cost $34,702 a year to hold under the same parameters.

“Similarly, Brunswick housing sees its investors contributing $23,805 per year to maintaining the holding — a tough ask if you’re trying to be patient.”

However, this research should not be taken solely on its own, as Mr Pressley reminded that cash flow is just a single element to consider when looking to invest. Other elements include proximity to job centres, the local demographics of an area and other influencing factors on housing supply.

The research analysed detached housing and looked at median rent, interest expenses on both 10 per cent and 20 per cent deposits, as well as considering any additional fees for maintenance, council rates, insurances and property management.

The 40 best suburbs for property investment that can cover their own costs, according to Propertyology, are:

Suburb

Distance
from CBD (in kilometres)

Median
house
price

Annual holding costs @ 80% LVR

Annual holding costs @ 80% LVR

Karama, NT

10.5

$392,000

$3,682

$1,722

Coopers Plains, Qld

15.0

$398,750

$3,632

$1,638

Risdon Vale, Tas

8.1

$222,500

$3,435

$2,322

Gagebrook, Tas

16.1

$170,000

$3,339

$2,489

Chigwell, Tas

10.7

$260,000

$3,033

$1,733

Muirhead, NT

12.0

$650,000

$2,915

($335)

Cedar Vale, Qld

45.7

$480,000

$2,797

$397

New Norfolk, Tas

24.8

$212,500

$2,737

$1,674

Bridgewater, Tas

17.2

$210,000

$2,617

$1,567

Malak, NT

10.1

$450,000

$2,460

$210

Davoren Park, SA

27.0

$188,750

$2,369

$1,425

Smithfield Plains, SA

28.2

$199,500

$2,219

$1,257

Elizabeth North, SA

26.1

$197,750

$2,089

$1,110

Elizabeth East, SA

22.7

$210,000

$1,958

$908

Russell Island, Qld

41.2

$190,000

$1,880

$930

Wagaman, NT

10.2

$490,000

$1,738

$712

Blackstone, Qld

28.0

$301,000

$1,612

$107

Gailes, Qld

19.4

$250,000

$1,456

 N/A

Virginia, NT

22.7

$630,000

$1,409

$1,741

Hackham West, SA

23.7

$261,500

$1,216

($92)

Brookdale, WA

27.5

$258,000

$917

($373)

Hillman, WA

37.7

$278,000

$117

($1,273)

Dayton, WA

15.1

$432,500

$86

($2,077)

Gilmore, ACT

15.5

$545,000

($22)

($2,747)

Medina, WA

31.5

$238,000

($40)

($1,230)

Gowrie, ACT

14.9

$576,500

($404)

($3,287)

Richardson, ACT

16.6

$495,000

($438)

($2,913)

Armadale, WA

25.7

$250,000

($520)

($1,770)

Charnwood, ACT

12.2

$460,000

($575)

($2,875)

Calwell, ACT

18.0

$550,000

($881)

($3,631)

Millgrove, Vic

61.7

$365,000

($1,826)

($3,651)

Rockbank, Vic

27.9

$505,000

($2,375)

($4,900)

Kurunjang, Vic

36.9

$388,750

($2,996)

($4,939)

Lake Munmorah, NSW

82.1

$490,000

($3,093)

($5,543)

Watanobbi, NSW

68.8

$495,000

($3,293)

($5,768)

Mannering Park, NSW

85.2

$480,000

($3,681)

($6,081)

Kanwal, NSW

69.4

$495,000

($3,732)

($6,207)

San Remo, NSW

77.4

$465,000

($3,740)

($6,065)

Melton South, Vic

36.4

$398,000

($3,915)

($5,905)

Warburton, VIC

64.7

$423,500

($3,946)

($6,064)

Top 5 capital city suburbs that pay for themselves
suburbs reb 1
lawyersweekly logo
FROM THE WEB
Recommended by Spike Native Network

 

Subscribe to our RPM mailing list

 

Do you have an industry update?
REAL ESTATE BUSINESS NEWSLETTER
Ensure you never miss an issue of the Real Estate Business Bulletin. Enter your email to receive the latest real estate advice and tools to help you sell.