For investors with a low budget, these suburbs offer a good prospect. Median prices are low, yields are high and supply and demand factors suggest prices should rise steadily over the next few years
PARA HILLS, SA
(Median house price: $213,000) (Rental yield: 6.7%)
Selling points: With low house prices, lots of open space and an abundance of nearby parkland, Para Hills, not surprisingly, is a red hot first homebuyer favourite. In addition, it is a popular place for families that do rent – close to half of residents are tenants. This balance helps to keep prices afloat, but the real selling point is the rents. With the right property, positive cash flow is not just a possibility it’s a probability thanks to rental yields of 6.7%.
Convenience and lifestyle: Some 14km from the Adelaide CBD, Para Hills lacks the transport options you’d associate with a lot of inner city suburbs, but it makes up for it with a strong choice of restaurants and shops. Para Hills Reserve and The Paddocks gives the suburb a good dose of green and numerous schools are in walking distance. Numerous bus routes serve the area.
Tight rental market: half of properties in the suburb are rented, but the vacancy rate remains a low 1.63%
Low supply: Just 0.71% of properties in the suburb are listed for sale, yet properties that do go on sale are lapped up by the market within 92 days
12-month growth of -5%, measured against annual average growth of roughly 10%, suggests prices have been underperforming in recent times and could be in line for renewed growth
Typical deals: As a lower priced suburb, the variety of property types is low and established houses form the majority of properties.
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(Median unit: $262,375) (Rental yield: 6.98%)
Selling points: Despite the low median price of units, Wembley is actually considered a moderately upmarket place to live. Houses are median priced at over $850,000, largely thanks to the area’s location just 5km from the Perth CBD. It’s also the suburb directly next to Subiaco – a precinct popular for its cafes and restaurants. Units in this part of Perth are not known for being large, but the location is pretty hard to beat.
Convenience and lifestyle: “Wembley has ample shopping, private and public schools along with a TAFE and public transport are available. Proximity to the Mitchell Freeway means access to Perth CBD and northern suburbs is relatively easy,” says Derek Jones, director, EOS Property Group. Although the area is popular with a lot of families, it also has a lot of elements to attract young, single professionals. City parks abound, restaurants, cafes and bars are in good supply.
Properties are tightly held and their supply on the market has been severely limited in recent times. The current proportion of units on the market accounts for just 0.44% of all units in the suburb
There is also a similarly severe shortage of rental accommodation. The vacancy rate now sits at an ultra-tight 0.6%
Typical deals: Most of the unit stock is comprised of one and two bedroom units and most are quite small when compared to the rest of Perth.
MOUNT DRUITT, NSW
(Median unit: $288,500) (Rental yield: 7.2%)
Selling points: With a median unit price of $228,500, Mt Druitt property is vastly cheaper than the median for Sydney as a whole, which now stands close to $580,000. The area was once home to a large amount of public housing, but this has been scaled back in recent years, allowing the supply of properties on the market to decrease. Since the suburb’s low property prices continue to make it popular, the supply and demand situation stacks well in investors’ favour.
Convenience and lifestyle: Roughly 40km west of the Sydney CBD, the suburb is convenient, not for people who work in the inner city, but for those who work in the city’s second CBD – Parramatta. Mt Druitt Station connects the suburb via a short rail journey to Parramatta, which is also accessible through the Great Western Highway. Healthcare is easily accessible in nearby Mt Druitt Hospital, while the Westfield Mt Druitt has all the shops renters would value.
Potential downside: “Mt Druitt is insulated from price falls by its sheer affordability but also with an evident price ceiling,” warns Andrew Peterson manager at thenexthotspots.com.au. “The ‘ugly duckling’ effect is a powerful one for capital growth in residential real estate but Mt Druitt needs to address its multiple problems before it sees anything more than limited growth.”
Auction clearance rate is 100%, indicating that a lot of buyers are waiting to get into the area
There is a shortage of rental accommodation: the vacancy rate is 0.43%
Rents have increased 7% over the last 12 months
Supply of properties on the market is very low: only 0.6% of all properties in the area are currently listed for sale
The deals: The suburb has an almost equal number of units and houses, with unit deals ranging from as low as $160,000 to upwards of $300,000. After that, there is little variation among competing property.
(Median unit price: $250,000) (Rental yield: 9%)
Selling points: Chinchilla is a regional centre with a diverse economy in Queensland’s south-eastern interior. It is a major energy hub, thanks to its proximity to coal and gas industries, and is a prominent feature in the livestock, wheat, barley and cotton industries. Aquaculture is also a feature of economic activity and the region produces close to one out of every four of Australia’s melons. Currently, the resource industry is active in the area, evident in mining companies purchasing residential properties for their employees. Population growth remains strong too, with ABS figures recording increases of 5% per annum over recent years.
Convenience and lifestyle: Chinchilla is situated within the Darling Downs region of Queensland – 248km north-west of Brisbane. Thanks to infrastructure investments in the area, brought about by mining activity, the town’s lifestyle component is improving. Residents enjoy a wide range of shopping and entertainment options and railway links to the rest of the state have been improved in recent years.
The majority of properties are houses, not units, but demand for units is there. Vacancy rates for units remain extremely low at 0.23%, reflecting strong pressure on the rental market
Due to this pressure, rents have increased 11% over the 12 months to August, giving investors very high yields
Typical deals: Close to 80% of properties within Chinchilla are detached houses. However, Corr Picone of Blue Horizons says townhouses rent for just as much as houses and tend to be in higher demand. “Workers are not interested in a large yard to maintain and prefer townhouse locations,” Picone says. “One of the drawbacks of the sprawling estates is that workers don’t tend to look after them so they often have an overgrown look about them.”
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