Perth suburbs dominate top 10 investment locations for capital growth

A new report from Hotspotting has revealed the top investment-grade suburbs in Australia for annual capital growth.

The Pulse report identified the top investment capital growth performers in Western Australia, South Australia, New South Wales and Queensland which also have high rental yields.

Half of the areas that made the list were also classified as some of the most outstanding markets for property investors nationwide according to analysis from depreciation experts Washington Brown.

Western Australia took out more than half of the spots on the list, with the suburb of Hillman recording 40% annual capital growth as at 1 July 2024.

Washington Brown director Tyron Hyde said this was reflective of the extraordinary price pressure experienced in Perth over the past 12 months.

Top 10 Property Investment Performers – Annual Capital Growth

Source: PropTrack as at 1 July 2024

The suburbs that made the list also feature above average metrics for yields and vacancy rates.

"The 50 locations featured in The Pulse report are chosen because they offer above average rental yields - but we also require our nominated locations to have the credentials for capital growth," Mr Hyde said.

"Of the 50 locations in the current edition of the report, 48 have recorded growth in their median prices in the past 12 months - including 30 with capital growth above 10%.

"The top 10 have all had price rises well above 20% - in addition to providing superior rental yields."

Investors in the top investment areas were also benefiting from thousands of dollars worth of depreciation benefits every year.

"Across the top 10 locations, annual taxation benefits potentially range from $2,500 to over $7,000 depending on the type of property and location," Mr Hyde said.

According to Mr Hyde, investors in Munno Para, which came in at sixth place, could be seeing taxation benefits of approximately $6,200 resulting in a net benefit of between $2,300 to $2,800 over the past year.

Hotspotting Director Terry Ryder said The Pulse report also features the top 10 locations for capital growth and yield combined, including five from the overall best capital growth investment performer list.

"The first of these five suburbs is Armadale in Perth, which has benefited from strong investor interest over the past few years," Mr Ryder said.

"Before Perth's boom convinced investors that any house in Perth was a good buy, few wanted to buy in downmarket Armadale. Now, it's flavour of the year for those seeking a cheap house with high growth prospects."

Balga in the City of Stirling also surged during Perth's city-wide boom, recording a 25% increase in the median house price and a 26% rise in rents over the past year. 

Mr Hyde said "it doesn't get much better than that" for property investors.

Speaking to Your Investment Property Magazine for the September edition of the magazine, Mr Ryder said that while the property market in Western Australia has been booming, the good times are already at an end.

"We believe that too many people are buying recklessly in Perth, and many will regret buying at high prices without undertaking the required due diligence," he said.

"After three years of major price growth, the current levels of activity and prices are unsustainable.

"Some investors - and especially those speculating from interstate - who have overpaid at the peak of the market will likely rue their decision sooner rather than later ... investors should tread very carefully from now on."

That said, there are still some opportunities to be had. Withers in the Bunbury region of WA has recorded stellar capital and rental growth over the past year.

"Rents have jumped 21% in the past year and 30% has been added to the median house price," Mr Ryder said.

"The median price remains below $400,000 and typical rental yields are still well above 7%, so investors are likely to continue throwing money at this suburb."

Image by Tibor Janas via Pexels