Key Summary
Many home buyers across Australia are finding that city homes are becoming too expensive to buy. So to get their foot on the property ladder, they are turning their attention towards regional areas. While these properties may not be in areas buyers wish to live in, they are more affordable and make for excellent investments.
Why Some Areas are More Profitable
According to CoreLogic data published during April 2016, some regional areas in Australia are profitable for investment. These areas have low median home prices, but high rental yields. This lower buy to rent ratio means that the return from the rent received covers more of the mortgage repayments.
At present, the national buy to rent ratio in capital cities is at 23.7, which is high. However, these rates in regional areas are between 5.1 and 8.5. These lower buy to rent ratios represent good value for money and an excellent way for potential home buyers to break into the market.
The National Buy to Rent Ratio
The buy to rent ratio in New South Wales (N.S.W) is currently high at 28.1. Victoria (VIC), the Australian Capital Territory (ACT) and Western Australia (W.A) are between 27.5 and 23.9. These rates are higher than the national average of 23.7, which makes them better for renters than investors. South Australia (S.A), Queensland (QLD), Tasmania (TAS) and the Northern Territory range between 23.5 and 18.6, all under the national average of 23.7, making these states ideal for investors.
The Most Profitable Regional Areas for Investing
Most of the profitable regional areas for investment have a median home price of under $500,000. Many of these areas are situated in the Northern Territory and in remote locations where median home values are under $100,000. However, the rental returns are stable.
| Best Areas for Regional Investment | |||
| Suburb | Median Home Price | Median Weekly Rent | Buy to Rent Ratio |
| Cooper Pedy S.A | $68,000 | $175 | 7.5 |
| Collinsville QLD | $88,750 | $200 | 8.4 |
| Dysart QLD | $77,500 | $180 | 8.3 |
| Katherine East NT | $131,950 | $500 | 5.1 |
| Morawa WA | $96,500 | $275 | 6.7 |
| Pingelly W.A | $92,500 | $240 | 7.4 |
| Quorn S.A | $98,500 | $225 | 8.4 |
| Rockbank VIC | $194,625 | $495 | 7.6 |
| Tara QLD | $78,000 | $220 | 6.8 |
| Zuccoli NT | $216,000 | $620 | 6.7 |
Source: CoreLogic RP Data
Other areas that are favourable for investment in regional locations are in tourism hotspots – Venus Bay in Victoria and Killcare and Black Head in New South Wales perform well. However, the rental income these areas produce is typically seasonal rather than annual.
The Least Profitable Suburbs in Australia
If you are seeking to rent and are looking for well-situated options, then some of the best areas are located in New South Wales. Here the buy to rent ratio is higher, which means that a home costs far more than it can collect in rent. These areas are ideal for the rentvestor looking to live in an upmarket area, while they buy investment property in areas that have lower buy to rent ratios.
All property in these regions have a medium home price of over $1.7 million. However, the median rent ranges from $330 a week up to $2,500.
| Best Areas for Renting | |||
| Suburb | Median Home Price | Median Weekly Rent | Buy to Rent Ratio |
| Austral NSW | $2.05M | $490 | 80.5 |
| Balwyn VIC | $2.2M | $551 | 76.9 |
| Box Hill NSW | $4.85M | $580 | 160.8 |
| College Park SA | $1.72M | $410 | 80.6 |
| Darling Point NSW | $5.9M | $1,400 | 81.0 |
| Deepene VIC | $2.71M | $540 | 96.5 |
| Lewiston SA | $2.6M | $330 | 151.5 |
| Point Piper NSW | $15M | $2,500 | 115.4 |
| Potts Point NSW | $5.78M | $685 | 162.1 |
| Rhodes NSW | $2.26M | $530 | 81.8 |
Source: CoreLogic RP Data
Of course, when it comes to buying an investment property, it pays to do the math. Do not look at areas that you would like to live in. Instead, look at those that have the most affordable property to buy, giving you the best return in terms of rental yield; if this is your investment strategy. If, however, your investment strategy is based on capital gains, then you may wish to look at property in other locations.
Are you thinking of investing in property? Then contact eChoice and find the right home loan for YOU today.