Which suburbs are best for residential investment?

Where in Australia today can you buy a good residential property, with the potential for great capital value growth and a healthy rental yield, and not spend a small fortune on the deposit?

A new report from financial comparison site Canstar, and real estate research firm Hotspotting has come up with the answer: a list of suburbs, and types of homes, around the country.

At the top of the Deposit Stars list are: the Sydney Inner West suburb of Newtown; Melton South, 35 kilometres west of Melbourne’s CBD; and Osborne Park in Perth’s north-west.

The analysis used loan-to-value ratios to determine the maximum house prices available for each deposit, together with a series of metrics to identify the most promising locations for potential buyers, including price and rental growth and proximity to infrastructure.

“We have found that units and townhouses are becoming much more popular in terms of affordability, lifestyle and security,” says Hotspotting national property analyst Terry Ryder.

“In the 40 years I’ve been doing research, I’ve never seen units competing so strongly in terms of capital growth and rents. Ten-year growth averages for units are now better than those of house and land.”

Among the best Sydney investment prospects, according to the report, are units in Newtown, Hurstville or Westmead with a $100,000 deposit, or those in Wiley Park, Jamisontown or Liverpool with a $50,000 deposit.

Raine & Horne Newtown sales executive Adam Freita agrees, saying, “Newtown does offer people a great place to park money.

“Capital growth has been very good, and rents have really gone up as it’s a very popular place for tenants, being so close to the CBD and with so many lifestyle elements, like cafes, restaurants and bars.

“We have so many great apartment buildings there now, too. The only problem is, we don’t have any room to develop more!”

Melbourne’s top picks for a $50,000 deposit include a house in Melton South, or units in Brunswick West or Notting Hill.

Double that outlay, and houses in Epping, Sunbury or Heidelberg West are good prospects.

Billy Spaseski from Eight Homes Melton South says a four-bedroom house with a double garage in the area still has a median somewhere in the mid-$500,000s.

“The price point is still low at the moment but there’s enormous growth potential with the new Melton Hospital being built for 2029,” he says.

“I think then, prices will go up, as everyone’s waiting for it, as well as the new shopping centre, Opalia Plaza.

“There are also good rental yields for both houses and units.”

In Perth, a house in Osborne Park can be bought with a $100,000 deposit, as can houses in St James and Forrestfield.

For a $50,000 deposit, units in Belmont or East Perth or a house in Midland would be promising.

Haiven Property Central’s Emily Garden is a big fan of Osborne Park, as she lives in a neighbouring suburb.

“It’s very affordable as it’s always been considered more of an industrial area,” she says. “But now with people pushing to outer suburbs, it’s coming into its own.

“And it’s close to prestige suburbs like Mount Hawthorn and Leederville, and the Karrinyup Shopping Centre, and it’s only 15 minutes to the city. It’s going well.”