Property

Investors can still find properties with a good balance of capital growth and yield – if they know where to look.

NSW

Growth in Sydney house prices lagged behind most Australian capital cities during the past decade, but the trend is changing.

Investors looking for a “good balance of capital growth and yield” should target properties in Sydney’s north-west to south-west, says Charles Tarbey, chairman of real estate chain Century 21. “There’s a vein of properties ranging from the Hills district to Abbotsbury in the south-west,” he says.

“There’s a good, strong population base there and that’s key to steady yield and steady capital growth.”

Property investments in the popular inner-west market may provide steady rental income but prices are climbing quickly, he says.

Arguably some of the best opportunities in Sydney are in the mid-range segment, with prices within the $400,000 to $800,000 bracket. Rental and buyer demand for such real estate is healthy, providing good yield and prospects of capital growth. “There’s hundreds of thousands of people who can buy in those areas and will rent there.”

Queensland

Brisbane could be Australia’s worst-performing capital city in terms of residential property following the drop-off in consumer confidence compounded by the January 2011 floods.

However, independent valuer Herron Todd White says unaffected properties in key suburbs offer strong investment potential, mainly due to a lack of competition.

HTW suggests quality non-flooded stock can be found in suburbs such as St Lucia, six kilometres from the CBD and close to the University of Queensland. Its upmarket riverfront streets were inundated but there’s plenty of dry stock on the market, where values have fallen.

A two-bedroom, three-level townhouse, recently valued at $400,000, is renting for $430 or a 5.5 per cent gross return. High-growth areas such as Caboolture to the north and Ipswich in the south-west favoured by low- to middle-income earners, are also achieving solid returns. The trade-off is poor capital growth.

Victoria

Shops on Glenferrie Road hold some of the best opportunities for capital growth on commercial property in Melbourne. Burgess Rawson director Billy Holderhead says the southern end of Glenferrie Road in Caulfield and Malvern stayed strong through the global financial crisis.

Buyers can expect to pay $2 million for a Glenferrie Road shopfront. But they shouldn’t expect a high return, as Holderhead says most shops sell on yields ranging between 3 and 3.5 per cent. “Due to the amount of wealth in the area, people are taking the view that there will always be demand for retail properties and that rents will always increase,” he says.

In the residential sector, Melbourne’s western suburbs are providing astronomical increases in house prices. Jas H. Stephens Real Estate managing director Craig Stephens says the western suburbs of Kingsville and Newport are still offering homes for around $500,000.

“Newport offers large blocks of land and good value for money,” he says. “You could buy a three-bedroom Californian bungalow with period features for around $500,000 to $580,000 there.”

Stephens says properties in Melbourne’s west can provide great value if you’re willing to renovate. The rental market is buoyant in Newport and Kingsville, thanks to young families and CBD employees looking for places close to the city.

Western Australia

Home values in Perth dropped 6.3 per cent in the 12 months to July after rising spectacularly in the past decade thanks to the mining boom, research from RP Data shows.

But the correction is yielding opportunities. Graeme Baxter, chief executive of Acton Real Estate, says some properties in the $1 million to $2 million range in affluent suburbs have come off between 15 per cent and 20 per cent from several years ago. Some of these are located on the coast or close to the Swan River, including Peppermint Grove and Applecross. Those who buy now could be in for capital gains several years down the track, Baxter says.

“Listings are on the decrease, which is a sign that things may be on the improve – but as more people move to Perth there’ll be higher demand for these properties.”

ACT

Property prices in the ACT are tied to the number of government employees in the nation’s capital.

Research shows property values across most capital cities fell in July, but Canberra bucked the trend to produce small capital gains. It recorded a 1.9 per cent jump in home values, after rising 1.8 per cent in 2011, the RP Data-Rismark Home Value Index shows.

Buyers looking for capital growth should concentrate on Canberra’s inner north and inner southern suburbs such as Ainslie, Campbell, Forrest and Deakin, says Craig Sheargold, sales manager at real estate firm Luton.

The growth will come from increasing demand for properties on established residential land. Properties within five kilometres of the CBD and priced at $400,000 to $600,000 will be in demand.

South Australia

When the SA government embarked on an ambitious urban renewal program in Hillcrest, north-east of Adelaide, many felt the suburb would never offer much to investors.

But two years after the project was completed, Hillcrest house prices shot up by more than 20 per cent, making it the fastest-growing suburb in the state. Michael Brock, managing director of Brock Harcourts, says history is about to repeat itself in Woodville in the western suburbs.

Two areas offer the best capital growth – cosmopolitan suburbs, such as Norwood, North Adelaide, Unley, Hyde Park, Henley Beach and Glenelg, and developing suburbs on transport corridors, such as Woodville and Woodville West.

Brock says renewed interest in Woodville will attract first-home buyers and investors. Alternatively, Brock suggests cosmopolitan suburbs with homes within walking distance of restaurants, schools and the beach where rises are slowing.