Australia's best-performing property investment locations revealed

A new report from property analytics company Hotspotting and depreciation experts Washington Brown has identified ten investment-grade locations that have performed best over the last year. 

To compile their list, the companies considered suburbs with strong capital growth performance, but also they also considered rental yields and low vacancy rates.

All of the suburbs on the top ten list were at the affordable end of the market, with none having a suburb median price of more than $530,000.

Capital growth

The suburb of Hillman in Perth’s outer southern suburbs topped Washington Brown and Hotspotting’s list.

Recording a stunning 40% capital growth over the last 12 months, Washington Brown Director Tyron Hyde said Hillman’s performance reflected the “extraordinary price pressure” in booming Perth.

CoreLogic says the value of the median dwelling across the entire WA capital has risen by 25.1% over the past year to $773,335, although growth has been stronger at the affordable end of the market. 

With a median value of just $530,000 (up from $378,570 a year ago) and attracting a rental yield of around 5%, Hillman still presents an extremely affordable entry point to the Perth market for first-home buyers and investors.

Two other suburbs in Perth’s south also make the Top Ten list: Armadale, which has seen a 35% increase in median dwelling capital growth to $460,000 and Orelia, up 33% to $500,000.

Balga in Perth’s north (up 26% to $490,000) and the suburbs of Withers near Bunbury (up 30% to $390,000) and Greenfields in Mandurah (up 28% to $510,000) are the other WA entries in the Top Ten list.

Coming in at number two is the town of Moree in northwestern New South Wales.

Tyron Hyde attributes the huge jump in the median annual capital growth (35%) to the construction of “Australia’s biggest national infrastructure project, the $35 billion Inland Rail Link”, which will connect Melbourne to Brisbane and will pass close to the town.

Munno Para (annual median capital growth of 28% to $495,000) came in at number six and Elizabeth East (up 26% to $478,000) at number eight.

Both are in Adelaide’s booming northern suburbs.

The small town of Oakey (up 24% to $368,000) outside Toowoomba in south-east Queensland rounded out the top ten.

Strong rental yields and capital growth

When it came to a combination of good capital growth and strong rental yield, Hotspotting Founder and Managing Director Terry Ryder lists his Top 5 as follows:

“The first of these five suburbs is Armadale in Perth, which has benefitted from strong investor interest over the past few years,” he says.

“Before Perth’s boom convinced investors that any house in Perth was a good buy, few wanted to buy in downmarket Armadale.” 

“Now, it’s flavour of the year for those seeking a cheap house with high growth prospects.”

Tyron Hyde says Balga in Perth’s north has “delivered extraordinary results for anyone who bought there a year or more ago”, with the median house value increasing 26% and rents rising by the same magnitude over the past year.

“It doesn’t get much better than that for property investors,” he says.

Hyde says Adelaide’s Munno Para is being “targeted by both home buyers and investors chasing affordable houses”, with a 28% increase in values, median rent rises of 18%, while the vacancy rate in the area is a tiny 0.4%.   

He says nearby Elizabeth East is popular with “first home buyers and investors on a budget, as well as tenants”.

Hotspotting’s Terry Ryder says the suburb of Withers near Bunbury, south of Perth, has chalked up “stellar capital and rental growth over the past year”.

“Rents have jumped 21% in the last year, and 30% has been added to the median house price”.

“The median price remains below $400,000, and typical rental yields are still well above 7%, so investors are likely to continue throwing money at this suburb.” 

The take-out

All the findings in these lists come from Hotspotting’s latest “The Pulse” report which has just been published.

You can buy a copy on the Hotspotting website for $900.

What’s rather strange is that while Terry Ryder and Tyron Hyde are now effusive in their assessment of the performance and the outlook for affordable suburbs in and around Perth, it was only three months ago that they both declared that “Perth is cooked.”

In a podcast in mid May, Tyron Hyde asked Terry Ryder if he agreed with an assessment he’d heard that “Perth was cooked” and Ryder agreed.

Basically, it boils down to these key points:

WA’s population is growing faster than other states.

The type of migrants WA is attracting from both overseas and interstate tend to be younger and are more likely to start families, providing another boost to the population.

Despite all the capital growth we have seen in the last four years in Perth (70% since March 2020) property in the WA capital is still affordable, making it extremely attractive to first-home buyers and interstate investors.

And while rent growth is also very strong, Perth is still the most affordable large Australian city to rent in.

On the housing supply side, available land for building is severely limited in Perth—basically there’s hardly any shovel ready blocks to build on.

Construction costs in Perth are also way more expensive than other cities, with a shortage of “finishing trades’ - that’s painters, tilers and carpet layers - meaning it’s taking much longer than other states to get built houses ready to be occupied.

And finally, WA’s economy is booming, and the signs are it will be for some time.

If Terry Ryder and Tyron Hyde really think “Perth is cooked”, maybe they should read their own report to set themselves straight.