Where to Buy Investment Property in Australia?

Confidence is returning, held up by solid demand, delays in the building industry, and plateauing interest rates. If you're wondering where to buy an investment property in Australia, we're going to take a look around the country for some hidden pockets of value!

Market Snapshot

For the 18th consecutive month, in July, median property prices rose nationally, in this case by 0.5%. Property Update shows that the combined median house price in Australia's capital cities is $997,963. The median unit price across the capitals is $673,178. Across the 5 major capitals, this represents an 8% rise over the current 12 months.

While the median prices alone aren't enough to suggest a strong market, it is useful for investors when deciding on areas they can afford. (18 months of sustained growth doesn't hurt as a positive indicator either!) When deciding where to buy investment property in Australia in 2024, the median prices immediately indicate the areas an investment budget will (or won't) cover.

In terms of market activity, last weekend saw just under 2000 auctions performing at a healthy 70.7% combined capital city clearance rate. This was the highest auction figure since June. When interest rates fall, we expect a hive of activity in these auction and clearance figures, though as of this month, of the 'big four' Aussie lenders, only the CBA believes a rate cut will come before 2025.

Investor Appetite 

If you're considering an investment property, there are many factors to consider. While here we are merely exploring where the best place to buy an investment property in Australia is, discussions with professionals such as your tax agent, lender, lawyer, and professional financial service provider are paramount to a strategy you feel comfortable executing.

When it comes to investment goals, consider your primary reason for buying an investment property - income vs yield.

Are you looking for additional weekly income? To capitalise on rising rents across Australia? The national average rental is $692 for houses and $544 for units, up a combined 7.7% on the current 12 months and (dare we say) continuing to rise. In the capitals, this figure jumps to $825 and $623, respectively. If cash flow is your primary goal, a look at the highest/best-performing rents nationally (i.e. Sydney, Gold Coast, Perth) might be a good place to start.

If your strategy is geared more towards yield on the investment (as a percentage), the combined capitals have held steady around 3.5% over the past 12 months, still around 1% less than pre-COVID averages. The regional property might be a better choice- currently grossing 4.4%.

Australian Capital City Projected Growth 2024-2027

If you're wondering if it's 'too late' to invest in property across Australia, Oxford Economics is predicting significant growth in the capital cities over the next 3 years:

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Using this table, a simple discussion with your professional or investment network could identify markets within your budget and returns strategy for further investigation. Factors that drive such growth include continued demand for housing and anticipated rate cuts as inflation steadies and drops.

Where is the best place to invest in property in Australia?

We can't predict the future, but as property managers, we can identify market trends.

Melbourne stands out as the sleeper here. Whilst Melbourne has underperformed in terms of growth compared to other capitals since 2021, the average house price is the lowest it’s been compared to Sydney in 20 years. This suggests an opportunity for savvy investors to nab an investment-grade property at a much lower relative price compared to the northern neighbours.

Whilst investors could look at Melbourne with an eye to the future, it's not to say immediate growth isn't possible to evidence. In the 12 months to April of this year, the exclusive inner eastern suburbs (including Surry Hills, Balwyn, and South Yarra) achieved 5-8% growth, easily outperforming the city's median. This is a great example of 'markets within markets' and why research is important.

In the latest Ray White property report for August, it's highlighted that the median price in the Gold Coast has reached $1.17 million, making it the second highest in the country after Sydney. Over the past year, house prices in the area have increased by 9 percent. This makes the Gold Coast an attractive location for those looking to invest in Australian property in 2024.

Suburbs such as Surfers Paradise, Mermaid Beach, and Southport bubble with high-density demand outweighing supply. PRD has forecast nation-leading prices of $2.7m on the Gold Coast by 2030, which, based on the current growth of 8-12% p.a., looks very achievable and an exciting investment prospect!

Both rental investment markets are underpinned by strong housing demand and steady migration; Melbourne now lays claim to the country's biggest population while the coast continues to attract solid investment from downsizing couples and apartment seekers nationally.

Are you looking for your ideal investment location? Is the Gold Coast the destination for your next property transaction? Do you need assistance in maximising your investment property? Feel free to reach out for a conversation. Please remember that this information is for interest purposes only - consult with your property professional before implementing any investment strategy.