Top 5 Sydney Suburbs for Property Investment

Top 5 Sydney Suburbs for Property Investment

When we think about top growth suburbs in Sydney we are really considering what that growth represents in terms of equity. Most of the time, growth is expressed in percentage terms but in some cases that isn’t enough information to understand if the figure is useful or not. For instance, a smaller growth percentage on a high value suburb is more beneficial than large growth percentage on a more affordable suburb E.g. $2M x 2% = $40k while $300k X 10% = $30k

Obviously, Sydney suburbs investment property will vary on price and rental return. What we do know about the relationship between property price and yield is that the more expensive the property the less the rental return will be. This is balanced though by better growth usually and that’s one reason why a more expensive property can find its way into an investment property portfolio.  Of course, accessing the equity is another issue that needs to be addressed, especially when the primary focus of the investor is on finding the best investment suburbs for growth.

Bearing that in mind, let’s look at a mix of properties around Sydney.

Paddington   Situated within walking-distance to the city with some of the most beautiful architecture. There are plenty of buses from Paddington into the city or out to nearby beaches. Paddington’s tree-lined streets, beautifully restored Victorian terrace houses will have you forgiving the narrow streets. There is a wide range of shopping and restaurants making this a very sought after area to live in..

The numbers:

Median House price $2,250,000 Median Rent $1,100 pw   Gross Rental Yield 2.54%

Median Unit price $983,500 Median Rent $550 pw  Gross Rental Yield 2.91%

Mosman As you would expect Mosman is an area in high demand. Located only eight kilometres from the CBD, with coastline on three sides, the hilly streets of Mosman are studded with premium properties. There’s a community bus for short trips and plenty of buses into the CBD; or the ferry if you prefer a water crossing. There are several schools in Mosman including well-regarded public and private institutions. Mosman is a truly unique suburb.

The numbers:

Median House price $3,625,000 Median Rent $1,650 pw Gross Rental Yield 2.36%

Median Unit price $1,126,250 Median Rent $620 pw Gross Rental Yield 2.86%

Newcastle Surrounded by water, with a rich history and a bright future, Newcastle is very attractive. Trains, buses and ferries are available for public transport and Newcastle Airport is only 15km north of the city. For the most part, modern apartments dominate the skyline, competing for views of the river or sea. Apartments range in style from art deco, to 70s brick as well as modern interpretations. Separate houses are available of course, especially further out of town.

The numbers:

Median House price $985,000 Median Rent $510 Gross Rental Yield 2.69%

Median Unit price $610,000 Median Rent $430 pw Gross Rental Yield 3.66%

Wollongong   The developers have been busy in Wollongong making this a high demand market – you’ll find apartments of every shape and size, together with villas and a few original houses. Wollongong was historically a working class town, but there is a strong mix of professionals, tradies, and clerical workers living there today. There’s a university so it’s also home to students and academics.

The University of Wollongong has a large campus and several schools service the area. Many people commute from Wollongong to Sydney city for work. Wollongong itself is considered a major coastal city.

The numbers:

Median House price $799,500 Median Rent $495 pw Gross Rental Yield 3.2%

Median Unit price $545,000 Median Rent $410 Gross Rental Yield 3.91%

Kellyville   Situated just 35 minutes from Sydney city by car, you can still find semi-rural areas of Kellyville. There are five main housing estates attracting people to the area. If you’re after a huge home for your family, you need look no further than Kellyville. Beautiful parks and plenty of facilities. Even though Kellyville is moving further towards development it still remains close to more rural settings.

The numbers:

Median House price $1,147,500 Median Rent $650 pw Gross Rental Yield 2.95%

Median Unit Price $788,550 Median Rent $560 Gross Rental Yield 3.55%

In the end, high value suburbs are limited for investment and rental purposes so they probably won’t be voted 2017 best investment suburbs. This is mainly because these suburbs require tenants with higher incomes to produce decent returns or alternatively lower rental amounts in respect of their value to attract higher numbers of tenants. Either way, equity is the major factor for these areas, not rental yield and with the tightening of lending criteria, extracting that equity could prove troublesome.

From that point of view, if you are after rental yield the emphasis is on more affordable housing in areas that are in high demand from large numbers of tenants. In particular, the property you buy should reflect the type that is in demand so it appeals to the majority of people looking to rent.

Median prices and rental amounts courtesy of Realestate .com


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