Four capital cities and one major regional location are the best picks for investors in 2020 with major infrastructure projects and rental yield driving property investment growth.
Although first home buyer loans hit the highest rate since 2009, investor lending also increased 4.9 per cent reveals year-on-year data from the latest Australian Bureau of Statistics report.
Major infrastructure projects were also expected to fuel house prices and rent in most of the top cities.
The five top locations to invest in are Brisbane, Adelaide, Canberra, Perth and the Sunshine Coast according to analysis by InSynergy Property Wealth Advisory.
InSynergy chief property investment advisor Richard Sheppard said property prices in the strongest markets over a six to 10-year growth cycle could increase by 80 per cent to 120 per cent while also enjoying higher yields at the start of the cycle.
“However, the worst performing markets could see prices slide by up to 20 per cent over the same period, which means choosing the wrong location could cost you dearly,” he said.
Sheppard said recent price growth in Sydney and Melbourne could falsely entice investors back to overpriced markets.
“When I don’t believe the current supposed upswing will last long,” he said.
“The only exception would perhaps be units in Melbourne as they are so much more affordable than houses, as well as having one of the biggest price differences between houses and units we have ever seen in Australia.”
There are also major rail and road projects including the Sunshine Coast Airport expansion project, $2 billion on Sunshine Coast Light Rail System, $880 million on the Bruce Highway Pine Rivers to Caloundra Road and the $195 million Beerburrum to Landsborough duplication.
“Noosa is probably the most well-known part of the Sunshine Coast, but its market has already enjoyed a number of years of price growth, so it is far too close to the end of its growth cycle.
“Also, geographically, it's a fair distance from the new town centre, so savvy investors have been cherry-picking more affordable houses and units closer to where the city’s future economic action will be.”
While coastal suburbs may have a few years of good times left, Sheppard said they were potentially halfway through their growth cycle.
The average price to buy a Sunshine Coast house is $617,525 and rent costs $500 a week according to regional Queensland data from Domain.
Houses—Buderim, Peregian Springs and suburbs close to Maroochydore
Units—Maroochydore, Mooloolaba and Coolum
“Recent data has shown Perth's median dwelling price finally starting to strengthen, plus the resources sector has also improved significantly as well,” Sheppard said.
“At the end of the day, Perth is one of our major capital cities and is home to nearly two million people, so its market was never going to stay in the doldrums forever, plus investing now, or by next year is better than investing anytime in the past 12- plus years.”
“In Sydney, gross rental yields for houses are just 2.7 per cent, but in Perth they are 4.2 per cent, so there is the opportunity there for future capital growth as well as current solid cash flow.”
The average price to buy a Perth house is $537,013 and average rent is $370 a week.
Units cost $342,708 on average to buy and $310 a week to rent, according to Domain.
Houses and Units—areas closer to the city and coast
The average price to buy a Canberra house is $788,621 and rent $580 a week.
Units cost $455,537 on average to buy and $480 a week to rent according to Domain.
Due to its robust economy, job opportunities, and the highest median incomes anywhere in the country, Canberra continues to be one of the steadiest markets in the country.
“Investors can earn anywhere from five-to-seven per cent gross rental yields for apartments, coupled with vacancy rates currently sitting at just one per cent," Sheppard said.
“This also creates net rental returns about twice as high as houses, especially when you take land tax into account as there is no tax-free threshold in the ACT.
“When the price gap becomes so large, history shows us that unit demand increases and prices along with it, especially when rents are so much higher for units.
“For these reasons, we are only recommending investment units and townhouses in Canberra. Investors should consider areas like Turner, Braddon and Kingston.”
Units only—Turner, Braddon, Kingston
Major projects in the area include the Whyalla steel mill expansion, Olympic Dam and $80 billion Navy frigate and submarine projects.
“These are very large projects that will attract very strong employment, wages and population growth, so after a slow 10- years for Adelaide property, leaving it relatively very affordable, we should finally see a great run of growth for at least a decade,” Sheppard said.
BIS Oxford Economics has also forecast price growth of 11 per cent growth over the next three years for houses, which is second only to Brisbane for Australian capital cities.
The average price to buy an Adelaide house is $542,947, while rent is $390 a week.
Units cost $306,327 on average to buy and $315 a week to rent according to Domain.
Units and Townhouses - Bowden, Kent Town, areas close to Port Adelaide
Houses—Areas close to Port Adelaide
The average price to buy a Brisbane house is $577,664 and rent $410 a week.
Units cost $377,549 on average to buy and $385 a week to rent according to Domain.
For Brisbane, affordability relative to incomes was its strongest market indicator with prices at 55 per cent of Sydney and incomes only 12 per cent lower.
“This is one of the reasons why about 1000 new residents are shifting to Queensland every week,” Sheppard said.
Houses—Middle and outer rings of Brisbane including Wynnum, Manly and Lota.