Rising rents have put the squeeze on renters while at the same time, boosted yields for investors.
However, there are still suburbs that are a win-win, with affordable rents for tenants and good upside for investors, according to a new report.
Henderson Advocacy’s Affordability Frontiers Report found a host of locations across the country where tenants were still paying less than 30 per cent of their income on rent, while the area is still ripe for price growth.
Henderson Advocacy, Founder, Jack Henderson said it was critical investors considered and understood how much people could afford to pay in the areas where they were considering buying an investment property.
“I think it’s all about affordability relative to the demographic that lives in the area,” Mr Henderson said.
“Investors get that wrong.
“They want it to be affordable to the everyday person, but the everyday person doesn’t live in every single area.
“Affordability always needs to be contextualised to the area in which the demographic lives.”
South Australia and Western Australia dominated the list of locations for houses, which was led by Hewett, a suburb north of Gawler in South Australia.
Hewett has a median price of $658,260 while investors can still get a yield of 4.69 per cent.
At the same time, tenants are paying less than 30 per cent of their income on rent.
Flynn in the ACT was second, followed by Singleton in WA, Torrens in the ACT and Secret Harbour in WA.
South Australia has seven of the top 25 affordable suburbs for investors, Western Australia has 11 and the ACT has six.
For units, Brooklyn Park in South Australia came out as the most affordable investment location, with a median price of $310,000 and a yield of 5.97 per cent.
Safety Bay in Western Australia came in second, followed by West Beach, Walkerville, Plympton, Prospect, Camden Park, Mawson Lakes, Brighton and Somerton Park all in South Australia.
Across NSW, Newcastle was found to be one of the most affordable locations offering great upside along with Sydney suburbs such as Manly Vale and Macquarie Hills.
Mr Henderson said there were still affordable areas investors could purchase in expensive locations like Sydney.
He said Manly Vale on the Northern Beaches made it onto the list and represented a great location for investors and the people who live there.
“Manly Vale is a small suburb, it’s close to the city, close to the beaches, but it is much more affordable than its counterpart Manly,” he said.
According to Mr Henderson, there are also a number of areas in Newcastle that made the list of affordable areas, led by New Lambton Heights and Rankin Park.
“Homes in New Lambton Heights have really big blocks of land and you’re really close to the village,” Mr Henderson said.
“You’ve got a wide range of homes as well, with some as high as four, five or six million dollars.”
He said Rankin Park was also a very affordable location for renters and investors.
“Your median rent will be around the $500-600 per week which, for a family with two incomes, is relatively affordable,” he said.
“And you’re still within 10-15 minutes of a major city with good public transport, beaches, everything you could want for a pretty low dollar figure.”
Mr Henderson said a lot of investors overlooked locations like Newcastle, which are both affordable for renters and investors but also have a long-term track record of growth.
“If you look at the track record of Newcastle and areas similar to it, there are 30, 40 or 50 years of data showing that the area has continually grown in value,” he said.
“It’s the biggest city in NSW outside of Sydney and there’s still a lot of disparity between the best suburbs and the prices in comparison to a suburb that is only five minutes away.”
