Sydney’s top boom suburbs for investors revealed

Sydney’s southwest and The Central Coast are emerging as the new frontline for property investors wanting to cash in on coming home value rises.

A new national report ranking the top 200 investment locations has revealed these once-overlooked areas have a rare combination of higher rental returns and impending price growth that could deliver new owners rapid equity gains.

Tumbi Umbi and Warnervale in The Central Coast topped the PropTrack list of promising Sydney locations for house investors, with other Central Coast locations Mannering Park, San Remo, Halekulani and East Gosford also making the top 20.

Houses in southwestern suburbs Austral, Cobbity and Cecil Hills also ranked among the top investment suburbs, along with Werrington, Faulconbridge and Richmond in the outer west and Blue Mountains.

PropTrack senior economist Angus Moore said regional and outer suburban areas could be strong options for investors because of higher rental yields.

“They are often thinner rental markets,” he said. “There’s just not as much supply and availability as the inner city, where you have a deeper rental market that historically can carry some risk of properties sitting vacant. And so you see higher yields to compensate.”

Suburbs across the southwest and inner southwest dominated PropTrack’s list of top investment suburbs for units.

Units in Lakemba, Wiley Park, and Bankstown all boasted rental yields over 5.5 per cent – high by Sydney standards and marginally below the likely holding costs of these properties.

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Ray White Berkley Vale principal Ian Boyle said he had seen investor interest grow in The Central Coast area since the latest rate cuts – especially for properties priced between $1m and $1.5m.

“Generally you’re getting more beachside suburbs for that,” he said. “And we’ve seen a bit of interest in strata units as well, because obviously they’re a little bit more affordable.”

Mr Boyle said some investors buying on The Central Coast were planning to live in their homes down the track.

“We get a number of investors buying up here with the option of moving in when they retire,” he said.

“Because they feel that they probably won’t be able to afford to purchase something up here in 10 to 15 years.”

“So we’re seeing a few getting in the market here to rent out the apartment for 10 years and then move into the property later down the track.”

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Hotspotting founder and director Terry Ryder said demand to live within a commutable distance of the Western Sydney International Airport, set to open in 2026, would push up rental returns in parts of Sydney west.

“That is the grand daddy of investment projects in Australia,” he said.

“You’ve got Marsden Park, Woodcroft, Cecil Hills, Austral within striking distance of that massive new infrastructure project.

“There’s nothing that generates demand for real estate like a big infrastructure project and this is one of the biggest the country’s ever seen.”

Investors who have recently snapped up homes said they were hoping to buy ahead of the market rush.

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David Stableford and wife Alex Cass recently purchased a unit in Manly through Mortgage Choice broker James Algar and said they were wary of getting left behind by price rises.

“The timing was down to the fact that interest rate rates are being lowered,” he said.

“With the rate cuts coming thick and fast, we decided to buy to get ahead of the uplift in the market.”

Mr Stableford said they purchased the property as an investment, but also as a place nearby for his mother to stay. “It’s not your typical reason for investing,” he said, noting that the unit, bought for $1.07m in July, is rented out as an Airbnb when Mr Stableford’s mother is away.

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Mr Ryder said investing in attached dwellings — as opposed to a house — had become increasingly popular in Sydney.

“Historically, units haven’t provided the same level of capital growth as houses as a general statement, but in the last two years, that’s changed quite dramatically,” he said.

“That’s an option that I think investors should increasingly look at, particularly in markets like Sydney, where houses are so expensive everywhere.”

Mr Moore said outside of some select city pockets and regional areas there was “not a lot of opportunity” for investors in NSW and Victoria compared to other states.

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“That’s not to say there aren’t good opportunities for investors … but certainly relative to those smaller states and smaller capitals, Sydney and Melbourne just haven’t performed as well,” he said.

Mr Moore said units would be a more appealing choice for many younger investors.

“For some investors, particularly those who may be earlier in their careers and looking at trying to get in at lower price points, that can be attractive,” he said.

“We are seeing growth for units over recent years, and certainly this year, the recovery that we’ve seen in Sydney and Melbourne has been for both detached and higher density.”

Top 20 investor suburbs Sydney – houses

Source: PropTrack

Top 20 investor suburbs Sydney – units

Source: PropTrack