The best capital cities for Aussie investors to buy property

The best capital cities for Aussie investors to buy property

Vacancy rates can be a great indicator for investors to find the hottest spots to buy property. Here at Mozo we’ve done some analysis on the vacancy rates in Australia’s capital cities to find out which ones are currently a landlord’s dream, and which are squarely a renter’s market.

Here are the highlights:

Hobart steps up as an investors paradise

With the shifting vacancy rates lately, Hobart has actually come out with the lowest vacancy rate around, at just 0.5%, making it a solid investment opportunity. That’s fives times lower than it was in 2012, when it was up around 2.7%. There are various reasons for the drop, including a growing population as Tasmania’s economy improves and the fact that property owners are holding onto inner city homes.

Canberra is a similar story, having seen a peak in vacancy rates in 2014, which has now calmed to an investor-friendly 1.1%.

Renters rule the roost in Perth

Perth, on the other hand, has gone in the opposite direction. From a very competitive 0.6% vacancy rate in 2012, it’s now jumped to a huge 5% – that’s a 70% increase in vacancies over 4 years.

The difference can mostly be put down to a slump in commodities and the mining sector, contributing to an oversupply of homes and a market skewed in favour of renters.

But that doesn’t necessarily make the market in Perth – and Darwin, where conditions are similar – a bad choice for investors. It just means buyers in these cities will need to keep their wits about them. If they find a good property at a bargain price, and can afford a few months where renters may be scarce, a brave investor could find a great deal here.

Sydney and Melbourne markets remain strong

Unsurprisingly, Sydney and Melbourne property markets are still forging ahead and providing solid options for investors, particularly those who are getting into the property market for the first time, or who aren’t ready to take the riskier bet.

Sydney’s vacancy rate has been stable at around 1.7% since 2012 and has continually strong growth prospects, particularly in inner city areas – though the downside is that prices are still sky high.

A boom in new construction saw Melbourne’s vacancy rate rise to 2.8% around mid-2012, but that’s calmed down now as population growth counters oversupply to bring vacancy back to 1.9%.

So if you want an investment with strong growth prospects that’s unlikely to suffer from a lack of tenants, it can still be worth taking on high property prices to get into the Sydney and Melbourne markets.

Rental vacancy rates 2012-2016

August 2012 August 2016 Difference
Hobart 2.7% 0.5% -34%
Canberra 1.1% 1.1% 0%
Sydney 1.8% 1.7% -1%
Melbourne 2.8% 1.9% -9%
Adelaide 1.6% 1.9% 4%
Brisbane 1.5% 2.7% 16%
Darwin 0.5% 3.0% 57%
Perth 0.6% 5.0% 70%
National Average 1.9% 2.3% 5%

Tips for property investors

  • Hire a good property manager. This is especially important if you’re buying interstate – you want someone trustworthy to look after your interests.
  • Don’t buy a property without inspecting it first. You wouldn’t buy a car you’d never seen, so why buy a home without checking it out first?
  • Buy with the future in mind. That means having a long term strategy in place that will allow you to weather periods where your rental is empty and not earning you any income. If you’ve taken out an investment loan to buy the property, it’s particularly important that you have a plan to cover repayments in this situation.
  • Do your research. Pay close attention to factors like rental demand, rental yield and capital growth prospects. Don’t jump the gun and wind up buying a dud property because you weren’t totally aware of what you were getting into.
  • Choose location first. Location is critical to finding an investment property that will rent easily and consistently. Look for a property close to public transport, parks, schools, shops and other infrastructure that potential renters are likely to want access to.
The best capital cities for Aussie investors to buy property was last modified: November 17, 2016 by Steve Jovcevski

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