Forecasting real estate trends has always been difficult, and the recent pandemic only made it worse. Nobody could have expected that we’d be wearing masks everywhere and worrying about our supply of tissue paper!
Nevertheless, we got through the thick of COVID-19 (at least, for now), and the Australian property market emerged from the chaos even stronger.
Whether you’re looking to start investing in real estate for the first time, or expand your property portfolio, Australia’s rental markets give attractive opportunities to invest in long-term capital gains and steady cash flow. Still, you’ll have to know which particular area in the diverse country is tipped to boom next for you to make the right property purchase decisions in 2021.
I’ve been keeping a close eye on the developing trends in real estate and what they mean for landlords. In this article, I’m breaking down 11 of the most promising or up-and-coming areas of the country for you to target in your search for your next rental investment.
Is now a good time to invest in Australian rental properties?
According to Asia Pacific Real Estate Market Outlook, Australia’s national property price growth increased 4% for houses and 1% for apartment units in 2020—a positive change amidst a pandemic.
The increase isn’t stopping any time soon as well, where SQM Research anticipates a more robust price increase (from 5% to 9%) throughout 2021!
When looking at specific markets, there is a shift in demand from larger, more prestigious cities to smaller and more affordable areas. This shift results in new investment opportunities in regional Australia. And this imbalance in supply and demand will lean towards oversupply until we allow international migration again:
Moreover, markets with low vacancies (e.g., Brisbane and Perth) may recover faster than those with elevated levels (e.g., Sydney and Melbourne). This is because people are looking for few rentals, resulting in a long queue of people competing for the same property. So when vacancies are low, rental prices rise. And when rental markets are strong, home prices will soon follow.
The chart below shows how low vacancy markets in Australia are already generating rental growth:
With these facts in mind, let’s look at a couple of real estate markets where you can benefit the most from this demand shift and the overall rental demand growth in Australia.
11 Best Rental Real Estate Markets in Australia
I’ve made a list of the top 11 best real estate markets in Australia for property investors seeking equity gains and cash flow in 2021. There may be a couple of other markets I’ve missed, but these areas certainly reflect the trends I outlined above, and they’re a good starting point for anyone looking to diversify their rental portfolio in new locations, or for new landlords on the hunt for the perfect investment area.
I based this ranking largely on the rent-to-price ratio and home value growth year-on-year (YOY), as these are strong indications of the potential cash flow and equity gains you’ll generate, respectively:
|Rank||Location||% of Renters||Vacancy Rate||Rent
& Key Takeaways
|1||Toowoomba, Queensland||27.69%||0.74%||$360||$390,000||0.40%||2.90%||Mount Lofty reports the biggest price increase at 13% in the past year. Wilsonton Heights (8%), South Toowoomba (5%), East Toowoomba (4%), and Wilsonton (4%) also recorded notable increases.|
|2||Sunshine Coast, Queensland||26.15%||0.63%||$550||$695,000||0.34%||15.83%||Noosa Heads, Sunrise Beach, Sunshine Beach, Warana and Yaroomba have long-term capital growth of up to 7% per year.|
|3||Rockingham, Western Australia||28.73%||1.04%||$350||$429,000||0.35%||11.13%||Rising markets include: Port Kennedy, Baldivis, Rockingham, Safety Bay, Secret Harbour and Waikiki. Port Kennedy leads with sales activity up 88%.|
|4||Perth, Western Australia||43.26%||3.48%||$500||$775,000||0.28%||12.40%||WA’s prices are forecasted to surge by 15% this year. Perth’s median house price reflects how affordable it is to own a home in WA.|
|5||Orange, New South Wales||29.68%||0.80%||$430||$550,000||0.34%||14.82%||Orange reports capital growth and rental income growth of 40% and 15% in the past five years, respectively.|
|6||Moreton Bay Region, Queensland||28.79%||0.74%||$415||$519,000||0.34%||6.79%||Narangba shows the highest growth in rent in the past year, up 16% to $397 per week. Mango Hill and North Lakes at $450/week.|
|7||Marion, South Australia||26.56%%||0.42%||$430||$550,000||0.34%||10.22%||Average annual growth in median house prices at 3% in the past decade in Plympton and Trott Park. Hallett Cove had the highest turnover in the last year at 183 sales.|
|8||Central Coast, New South Wales||23.41%||0.73%||$480||$700,000||0.29%||11.11%||Notable rising markets: Ettalong Beach and Tumbi Umbi, with house prices up 13%. Long Jetty and Umina Beach showed a price increase of 11%.|
|9||Canberra, Australian Capital Territory||28.56%||0.79%||$615||$790,000||0.33%||12.85%||Median house prices in many suburbs now exceed $1 million. Nevertheless, the average clearance rate is at 93%, which makes it a seller’s market still.|
|10||Blacktown, New South Wales||36.66%||2.25%||$410||$770,000||0.23%||10.00%||Median house prices increase by 8% in Quakers Hill, Seven Hills, and Toongabbie.|
|11||Bendigo, Victoria||33.34%||2.32%||$370||$499,000||0.32%||8.47%||Strathdale’s median home price increased by 18%. Kangaroo Flat has a whopping 182 annual sales.|
My advice? Invest in rental properties now, before prices rise even higher.
The Australian real estate market is livelier than ever this year. Rents and home values are only poised to rise in the coming years, so if you’ve been planning to get into rental investing, now is the time to do it if you want to realise better equity gains and achieve a stronger rent-to-price ratio with your property.
As you plan your investments for the next few months, be sure to do thorough research so you can position yourself to take full advantage of this market growth.
Still not sure where you want to invest in? Our expert team of property managers can help you. Get in touch with us directly or browse through our other blogs to get more tips on how to find your next investment property. We are always more than happy to chat and help!