A new report has ranked some of Australia’s largest capital cities on their suitability for investors, highlighting the suburbs most likely to offer investors bang for their buck.
Performance Property Advisory (PPA) has given Brisbane a ringing endorsement in its latest Investor Market Update, proclaiming the city Australia’s leading investment location and noting the lackluster investment conditions in Sydney and Melbourne.
According to PPA, a combination of strong population growth, infrastructure investment and an undersupply of housing cemented Brisbane's status as an investment hotspot.
“Homes in Brisbane are showing strong investor value and will continue to do so thanks to the city’s ongoing population growth, low levels of unemployment (currently around 5.4 per cent) and its continued undersupply of housing,” David McMillan, PPA Director Acquisitions, said.
The PPA Investor Market Update is based on research from the ABS, real estate institutes, SQM Research, CoreLogic RP Data, PriceFinder and Residex.
Rental growth, price growth, affordability, housing vacancy rates, population growth, employment, supply of housing, income growth, size of population, infrastructure spending and availability of stock are the factors considered when ranking each city’s performance.
“Brisbane’s residential population has grown by 27 per cent over the past decade or so - from approximately 1.7 million to 2.1 million people – with an additional population increase of 820,000 projected over the next two decades.
“Combine this with the fact that the infrastructure spend is up $1.07 billion on 2015 and you have a very positive story for Brisbane,” Mr McMillan said.
According to PPA, the best investment suburbs are in the city’s middle ring, including the suburbs of Stafford, Kedron, Nundah, Mitchelton, Camp Hill and Morningside.
However, despite the Brisbane market's overall rosy outlook, PPA highlighted the risk posed to the inner-city market by apartment stock, describing the market as "transitioning from neutral to oversupply".
The company also cautioned against investing in Brisbane's outer metro area, describing it as "slightly overvalued and oversupplied".
Adelaide ranked second on PPA’s list, with the company citing a strong median rental yield of 3.8 per cent and housing affordability as the main factors for its position.
Melbourne took third place. PPA said poor rental yields of 2.8 per cent is a chief reason behind the ranking.
However, the company highlighted suburbs such as Mornington, Mount Eliza, Frankston and Queenscliff as “lifestyle” areas which may provide a better return for investors.
Sydney placed last in the rankings, with Mr McMillan pointing to “serious affordability issues” as the main reason.
“While demand for property is outpacing supply, the market is starting to experience serious affordability issues which could see the average number of persons per household rising as people are forced to shared rental accommodation,” Mr McMillan said.