Darwin and Hobart have been revealed as the nations best capital cities for cashflow positive properties, while Sydney and Melbourne have priced investors out of the market.
Buyers agency and property market research firm Propertyology, analysed cash flow positions in each capital city to understand the 40 best suburbs in Australia to invest in.
The report investigated median rents and interest expenses depending on whether an investor purchased with a 10 per cent or 20 per cent deposit.
It also took into account standard holding costs such as maintenance, council rates, insurance and property management fees.
“Our research proves there are plenty of suburbs within Australia’s capital cities where high rent returns make it easier on landlords to patiently wait for equity gains,” Propertyology’s head of research Simon Pressley.
| Suburb | State | Median House Price | Annual holdings cost @ 80% LVR | Annual holdings cost @ 90% LVR |
|---|---|---|---|---|
| Karama | NT | $392,000 | $ 3,682 | $ 1,722 |
| Coopers Plains | QLD | $398,750 | $ 3,632 | $ 1,638 |
| Risdon Vale | TAS | $222,500 | $ 3,435 | $ 2,322 |
| Gagebrook | TAS | $170,000 | $ 3,339 | $$ 2,489 |
| Chigwell | TAS | $260,000 | $ 3,033 | $ 1,733 |
| Muirhead | NT | $650,000 | $ 2,915 | ($ 335) |
| Cedar Vale | QLD | $480,000 | $ 2,797 | $ 397 |
| New Norfolk | TAS | $212,500 | $ 2,737 | $ 1,674 |
| Bridgewater | TAS | $210,000 | $ 2,617 | $ 1,567 |
| Malak | NT | $450,000 | $ 2,460 | $ 210 |
| Davoren Park | SA | $188,750 | $ 2,369 | $ 1,425 |
| Smithfield Plains | SA | $199,500 | $ 2,219 | $ 1,257 |
| Elizabeth North | SA | $197,750 | $ 2,089 | $ 1,110 |
| Elizabeth East | SA | $210,000 | $ 1,958 | $ 908 |
| Russell Island | QLD | $190,000 | $ 1,880 | $ 930 |
| Wagaman | NT | $490,000 | $ 1,738 | $ 712 |
| Blackstone | QLD | $301,000 | $ 1,612 | $ 107 |
| Gailes | QLD | $250,000 | $ 1,456 | |
| Virginia | NT | $630,000 | $ 1,409 | $ 1,741 |
| Hackham West | SA | $261,500 | $ 1,216 | ($ 92) |
Calculations are based on median house values and median rents as at May 2018.
Annual holding costs assume 4 weeks vacancy per year, 4.5 per cent loan interest, and general provisions.
Surprisingly, Australia’s best capital city cash flow suburb is in Karama in Darwin, which is just 10km from the GPO and has a median house price of only $392,000.
“This investment will generate a positive cash flow of $3600 per year if purchased with a 20 per cent deposit or $1700 per year using 10 per cent,” Pressley said.
Hobart’s property market continues to strengthen with plenty of cash flow positive options for under $250,000 in suburbs like Risdon Vale and Chigwell.
However, in Sydney, Melbourne and Canberra, there are currently no suburbs where an investor can buy a detached house and expect it to be cash flow positive with a deposit of 20 per cent or less.
“Even though it’s 80 kilometres from Sydney’s GPO, the Central Coast (Wyong and Gosford) are technically part of Greater-Sydney, while Medlow Bath in the Blue Mountains has a median house price of $500,000.”
Pressley noted investors who favour Sydney just need to get "out of town a little" to find houses with strong cash flow.
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| Suburb | State | Median house price | Annual holdings cost @ 80% LVR | Annual holdings cost @ 90% LVR |
|---|---|---|---|---|
| Brookdale | WA | $258,000 | $ 917 | ($ 373) |
| Hillman | WA | $278,000 | $ 117 | ($ 1,273) |
| Dayton | WA | $432,500 | $ 86 | ($ 2,077) |
| Gilmore | ACT | $545,000 | ($ 22) | ($ 2,747) |
| Medina | WA | $238,000 | ($ 40) | ($ 1,230) |
| Gowrie | ACT | $576,500 | ($ 404) | ($ 3,287) |
| Richardson | ACT | $495,000 | ($ 438) | ($ 2,913) |
| Armadale | WA | $250,000 | ($ 520) | ($ 1,770) |
| Charnwood | ACT | $460,000 | ($ 575) | ($ 2,875) |
| Calwell | ACT | $550,000 | ($ 881) | ($ 3,631) |
| Millgrove | VIC | $365,000 | ($ 1,826) | ($ 3,651) |
| Rockbank | VIC | $505,000 | ($ 2,375) | ($ 4,900) |
| Kurunjang | VIC | $388,750 | ($ 2,996) | ($ 4,939) |
| Lake Munmorah | NSW | $490,000 | ($ 3,093) | ($ 5,543) |
| Watanobbi | NSW | $495,000 | ($ 3,293) | ($ 5,768) |
| Mannering Park | NSW | $480,000 | ($ 3,681) | ($ 6,081) |
| Kanwal | NSW | $495,000 | ($ 3,732) | ($ 6,207) |
| San Remo | NSW | $465,000 | ($ 3,740) | ($ 6,065) |
| Melton South | VIC | $398,000 | ($ 3,915) | ($ 5,905) |
| Warburton | VIC | $423,500 | ($ 3,946) | ($ 6,064) |
“For example, a house in Lake Munmorah on the Central Coast will cost $3093 per year to hold.”
“Compare that to somewhere like Blacktown, 38 kilometres west of Sydney. That suburb has a median house price of $740,000 and a property there will cost $11,775 per year to maintain, even if you have a 20 per cent deposit.”
The figures are even worse for the suburb of Hornsby, where a median house price of $1.33 million will leave you $26,152 a year worse off.
While investors face falling house prices, rising interest rates and tighter lending conditions, analysis has revealed a wealth of cash flow positive options around the country.
“Fundamentals such as proximity to employment nodes, local demographics, and the various factors which affect housing supply are important considerations as well,” Pressley said.
“Suburbs offering both high cash flow and capital growth potential are not common, but they can be found in every state.”
