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Top areas where investors are winning big as values surge
Several suburbs have emerged as being the most profitable for investors nationwide as dwelling values have continued to grow, assisted by longer hold periods, according to new Cotality data.
The Pain and Gain report showed that the most profitable areas for investors were in NSW, Queensland, and Western Australia.
Nationwide, profitability reached a 20-year high, with 95.9 per cent of Australian property resales making a profit last quarter, while the median gain hit a record $365,000.
The data showed a slight increase in the median hold period for resales in the last quarter, with profitable dwellings held for 9.2 years, up from 9.1 in September, while the median hold for a loss-making resale was 8.2 years.
It also noted that for loss-making houses, the hold time was much shorter, with the median at 4.1 years in December, compared with 9.4 years for profit-making house resales.
Cotality’s head of research, Gerard Burg, said the findings showed there was an advantage in holding property for an extended period of time when the market continues to trend higher over the long term.
“The contrast is when we look at the weaker performing ones, a lot of times it's much shorter holding periods, so those are the ones that have been most exposed to the cycle of the market,” he said.
“If you can stand to hold for a longer period of time, the likelihood of the profitable outcome increases.”
Here are the most profitable suburbs:
Kiama
The coastal town of Kiama, located in the Illawarra region, took out the title for most profitable local government area (LGA) overall, recording a median gain of $730,000, with a hold period of 10 years.
Noosa
Queensland’s Noosa, also a lifestyle coastal area, saw resale profits of a median of $705,000, following an average of nine years.
Burg said lifestyle areas such as Kiama and Noosa had seen migration from Sydney during the pandemic, driving values to steadily rise.
He said while momentum had fallen from 2022 through 2023, it was once again trending a bit higher.
“Both being more lifestyle markets … they're very much both towards the higher end of the market, and that can lead to that greater opportunity for profitability because the value increases so high.”
Joondalup
Joondalup, in Perth’s north, was the third most profitable LGA, seeing an average gain of $695,000, with a median hold period of 11.3 years.
The Hills
The Hills district in Sydney had a median gain of $730,000, with a hold period of 8.0 years.
Melville
Perth’s Melville area recorded a nominal gain of $730,000, with an average hold period of 10.2 years.
Burg said that Perth markets had seen a large increase in values over the last 12 months, with the city experiencing an imbalance between demand and supply.
“We have seen very little available stock, in recent times it's been between 40 and 50 per cent below the five-year average for the number of properties that are listed,” he said.
“At the same time, over the last few years, Perth's population has increased quite rapidly. So that surge in value in recent times has really contributed to the increase in values there.”