Investors are being urged to remove their ‘cash flow’ blinkers and look to good locations offering solid capital growth opportunities.
With interest rates and cost of living pressures rising, Hello Haus Head of Research Sam Powell said more investors were zeroing in on cash flow-positive properties to cover rising holding costs.
But he said but this was a flawed and dangerous approach to investing.
“While cash flow is an essential piece of the puzzle, it can’t be your only determining factor,” Mr Powell said.
“You should definitely select locations that have above-average rental returns, but you must also seek superior capital growth potential.
“The third element is choosing the right asset in those chosen suburbs.
“If you are only focused on one or even two of these three key pillars, you’re increasing your chance of failure.
Mr Powell said that while short-term cash flow can be very appealing, longer term investors risked purchasing an underperforming asset, or worse, one that goes backwards in value.
He said across the country there were a number of locations that offered a good combination of growth potential combined with a solid rental yield.
“Queensland is full of opportunity for investors right now with high interstate migration, relative affordability, great infrastructure plans and, of course, the 2032 Olympics to look forward to,” he said.
“While investors might immediately look to Brisbane, there are excellent regional options for those with a limited budget.
“Agriculture and mining centres are foundational among my picks with suburbs in Toowoomba, Townsville and Rockhampton on the list.
He said he also liked Raceview in the satellite city of Ipswich, because housing there was eminently affordable, while services and facilities were comprehensive.
In NSW, Mr Powell said regional locations offered investors a balance between cash flow and capital gains.
“The four locations we’ve identified meet our criteria, but I particularly like Cardiff South as an option,” he said.
“Cardiff South’s position just 10 kilometres from the Newcastle CBD means ready access to one of the state’s most active regional centres.
“At its median price, you can purchase a solid, secondhand detached home on 700-plus square metres of land.”
He said he also liked the potential of Bellbird Heights, Boambee East and West Albury.
According to Mr Powell, regional suburbs away from the heart of Melbourne are the way to go with locations like Wodonga, Kangaroo Flat, California Gully and Bairnsdale.
“Rental returns are strong but so are the fundamentals that drive capital gains,” he said.
“Wodonga is a great example.”
Along with excellent metrics in terms of median rental yield and low vacancy, Wodonga is a fast-growing regional location, he said.
Mr Powell said South Australia had been the dark horse in property investment circles for some time.
“Affordability has been its hallmark, but capital growth was subdued while other capital cities thrived… but that’s changed dramatically in recent years,” he said.
“Rosewater is within a short commute of the Adelaide CBD, yet it enjoys all the benefits of its Port Adelaide location.
“There’s the waterfront lifestyle and the comprehensive services and facilities on the doorstep.”
Mr Powell said Happy Valley, Blakeview and Salisbury East all had potential as well.
According to Mr Powell, the resurgence of mining was creating economic opportunity in Western Australia, and investors from around the nation were keyed in.
“There are great coastal and regional locations ripe for investment,” he said.
“Suburbs that have their own identity but are also very accessible to the centre of Perth.
“My pick location is Shoalwater, 40 kilometres south of the Perth CBD.
“This waterfront suburb is stunning with lifestyle drawing in new residents.
He said he also thinks Gosnels, Girrawheen and Mirrabooka all have capital growth potential in the short term.
