The best properties and locations for investors seeking capital growth

Having revealed that Adelaide, Sydney and Brisbane are enjoying the best quarterly gains in house prices, the latest Domain House Price Report holds valuable clues to some of the best kinds of properties, and locations, for investors seeking capital growth.

Another big surprise, that unit prices in Brisbane, Perth, Melbourne and Darwin are outperforming house prices, is another good pointer.

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Then there are also the findings that the national growth rate is declining, and more stock is on offer.

“The slowing growth trend will be underpinned by a growing choice of homes on the market that has improved annually across the combined capitals,” says the report author, Domain chief of research & economics Dr Nicola Powell.

“More total properties are for sale in Sydney, Melbourne, Hobart and Canberra, which means homes are being listed for sale more quickly than they are being purchased.”

With more houses and units now available, investors will have a great deal more choice and, if they prefer free-standing houses as investments, then the figures suggest the cities that could hold the promise of even more growth.

Adelaide enjoyed stellar 15.8 per cent price growth over the last 12 months, according to the report, while Brisbane had a 12.5 per cent rise, and Sydney, 11.1 per cent.

“The choice will always come down to purchase price, growth and yield,” says Kate Hill of Adviseable Property Advisors. “Adelaide is very attractive because of its cash flow and it does have really good growth drivers.

“I think it often isn’t considered as it’s more of a quiet achiever, but property is affordable there and it’s looking very good at the moment.”

Sydney will always be a good bet, Hill says, but its higher prices mean yields can be fairly flat, especially with high interest rates, but Brisbane is also a good prospect with superior population growth.

Brisbane is also a favourite for investment in apartments, having chalked up record-high prices this quarter.

“Everyone has eyes on the Olympic Games coming up and all the infrastructure that’s being put in, as well as its relative affordability compared to Sydney,” says property valuer and advisor Anna Porter, the founder of Suburbanite.

“We’re also starting to see some upswing in Perth but there is a lot of supply coming online that could dampen price.

“It’s also interesting to see Darwin moving into a growth phase which is driven by affordability, especially among first-time investors, and it does have high yields.

“But without a lot of new employment in Darwin, is that sustainable?”

Porter recommends investors take note of “the markets within markets” and check particular locations. She favours apartments in small, boutique blocks or lower-rise complexes that are 10 to 20 years old or more, over new off-the-plan products.

“The older stuff does tend to hold its value more,” she says. “It’s more unique than a lot of product in a bigger block, often has more space and lower strata fees, and downsizers in particular tend to prefer it.”