Australia's top 20 suburbs for residential investment

A string of Sydney suburbs have dominated a list of the best places in which to invest in property, but it was two south-east Queensland neighbourhoods that took out the top spots.

The Brisbane suburb of Woolloongabba and the Gold Coast’s Burleigh Heads were named as the top two places in which to invest in residential property, in new research commissioned by Me Bank. They outranked a raft of NSW suburbs that made the list and took out nine of the top 20 spots. 

Five Dock and Rozelle, both in Sydney’s inner west, and North Melbourne were also among the top five picks, based on analysis conducted by Ethos Urban, a planning and urban economics consultancy.

New transport infrastructure and lifestyle appeal measurables – such as the availability of cafes – were the key criteria used to determine the best investment prospects, accounting for half of a suburb’s ranking. Factors like population growth, median house prices, average rental prices and yields were also among a range of criteria used.

Chris McNeill, an urban economist and director of Ethos Urban, said there were strong links between property values and proximity to train and light rail stations, with demand likely to rise in areas set to benefit from new or upgraded transport infrastructure, which could also bring potential urban renewal.

Woolloongabba, for example, was already serviced by two train stations, but the new Cross City Rail Project would provide a new line running directly under the suburb, increasing connectivity and changing the way people use the area, Mr McNeill said. As would the Gold Coast Light Rail, which would provide greater connectivity to Coolangatta and Surfers Paradise for Burleigh Heads, as well as Mermaid Beach (ranked 17th) and Miami (18th).

In Sydney, suburbs set to benefit from new metro lines took out eight spots, with Five Dock and Rozelle followed by Parramatta (7th), Crows Nest (10th) and Waterloo (12th). Coffs Harbour on the NSW north coast also made the cut, in 13th place.

“Five Dock, Rozelle, Parramatta, Pyrmont (15th) and Concord (19th) will significantly benefit from the high-speed, high-frequency metro line connecting them to the Sydney CBD,” Mr McNeill said. “This adds to their appeal for investors following recent growth in rental prices, median house prices and change in white-collar workers.”

The Melbourne suburbs of Preston (9th) and South Melbourne (10th), as well as Ellenbrook (6th), Yanchep (11th) and Claremont (16th) in Perth, also ranked among the top 20.

There were no entries in the ACT, South Australia, Tasmania or the Northern Territory. This did not mean they were lacking in favourable investment options, Mr McNeill said, but refected that the most impactful transport projects were currently being undertaken across the other states,

“There are major rail infrastructure projects underway in Sydney, Melbourne, Brisbane and Perth, and for that reason, those cities tend to dominate the list,” he said.

Already many of the suburbs do not come cheap. In Five Dock – one of eight suburbs where houses are the primary dwelling – the median house price sits at about $1.98 million. This would likely limit the suburb to a select group of investors, Mr McNeill said, but it was still worth considering for those with the money to speculate on further growth.

Apartments were the main dwelling type across 11 of the suburbs, while townhouses were the primary dwelling in just one suburb, Rozelle.  

Levels of housing supply were not taken into consideration, Mr McNeil noted, but he said buying an apartment that was – or would soon be – served by new transport infrastructure was worth serious consideration, even in areas of higher supply. 

Some of the top picks, such as Parramatta, Waterloo and Crows Nest in Sydney, had seen apartment prices fall or record minimal growth over the past year. While the apartment market has been softer in parts of the city – with more tenants and buyers seeking larger homes during the pandemic and lockdowns –  Mr McNeill said he expected demand to pick up, particularly as immigration returned, and felt there was strong potential in the long term.

“I think the way the population moves in a post-COVID environment over the next few years will be very interesting to see but I don’t think we’re going to see a vast drift away from big-city growth … though it really remains to be seen to see how strong some of this structural realignment is.”