If you want to invest in property long-term, you’re probably aware of the term “capital gains”. Some of the suburbs in Sydney will experience impressive growth while the others might simply only retain their value. Although both make for a good investment, one type is obviously better.
I have substantial experience in the property market, with Sydney being my primary location. However, no one can absolutely guarantee that an investment will yield amazing results.
Like all markets and the economy in general, there are some factors that indicate growth and stability. While these do not equate to a guarantee of growth and success, they are impartial and can help when considering options. Just remember, there is no “one size fits all” investment.
What I look for when judging the prospect of capital growth:
- A historical trend of positive growth in value.
- Infrastructure development and improvement in the surrounding area, which tends to increase the value of nearby properties.
- If the suburb is popular with high earning professionals, this is promising as it may indicate the ability to afford more expensive property given their income is considered statistically above average.
- The median rental yield in these areas, which is important if your investment property will be a source of passive income.
- The demand for property in the area outweighs the supply.
Read on for my pick of Sydney suburbs set for high capital growth. Please note that the rental yields stipulated are for houses and not units.
Sixth best to invest in
- Median 3 bedroom house price: $1,205,000 1
- Year-on-year change in the median sale price: 32% 2
- Rental yield: 2.83% 1
Bexley is located 15km outside of the CBD with a population of 20,9873. There is a high demand for property within this suburb and it experiences a vacancy rate of around 1.74%. Houses on average sell within 98 days and around 24% of the occupants live in rental accommodation. 3
Although the local amenities are not particularly impressive, there is enough for daily needs and light entertainment. The main appeal of the location is its central location, so you or your potential tenant won’t feel like they’re missing out on an exciting lifestyle.
There is no local train station, but the relatively low cost of the homes is attractive enough to make the drive worth it.
The most dominant demographic in Bexley is established couples and families, attracted by the larger schooling district on offer. Quieter areas such as Bexley have proven to attract more reliable, long-term tenants.
- Relatively affordable.
- Impressive yearly growth in sales prices.
- In-demand area with a reliable demographic (as potential tenants).
- Lack of public transport.
- Unimpressive local amenities.
Fifth best to invest in
- Median house price 3 Bedroom: $2,802,500 4
- Year-on-year change in the median sale price: 19.22% 5
- Rental yield: 2.22% 4
Coogee is a self-sustained coastal suburb with beautiful views and high demand for property. With a population of 15,210 people, this suburb provides a laid-back beach lifestyle with many places to eat and socialise. 6
A massive 45% of the residents are tenants and the suburb sits just 8km away from the city. For those that favour public transport, Coogee predominantly makes use of buses.
However, there is a massive light rail project underway which could have a significant effect on property prices in the near future.
Unmarried, independent youths make up the second-largest portion of the demographic, and the average age of residents is between 20 and 39 years old. 7
The median household (weekly) income is well above average at $2,277, which could explain the slightly higher rental yield in the area.
- A very high percentage of residents are tenants/renters.
- Beautiful location with a beachside lifestyle appeal.
- Infrastructure upgrades with the prospect of increased property value.
- Slightly higher rental yield than the competitors on the list.
- Higher property prices.
- Lower percentage change in median sale price.
Fourth best to invest in
- Median 3 bedroom house price: $1,875,500 8
- Year-on-year change in the median sale price: 27.5% 9
- Rental yield: 1.9% 8
Cronulla lures new residents from far and wide due to its attractive seaside location. There is a population of 18,070 with 34% being tenants. 10
The demand in the area is not exceptionally high, but that may be due to the hefty price tag. Having said that, the average time to sell a house is around 76 days.
While there is decent rail connectivity, the hour it takes to reach the CBD is a drawback. The largest demographics are mature, established individuals and independent young professionals.
There is usually an influx of tourists in the suburb. This may not be ideal for some residents, but it can be lucrative for those in the short-term rental business.
- A seaside location that’s hard to beat.
- Rail connectivity, which is rare for Sydney's beach suburbs.
- Great social scene and a high percentage of renters.
- Long commute to the CBD.
- Higher entry price point for houses.
Third best to invest in
- Median 3 bedroom house price: $2,300,000 11
- Year-on-year change in the median sale price: 30.58% 12
- Rental yield: 1.7% 11
Narrabeen is situated amongst the northern beaches of NSW, an area offering an enhancing combination of beaches, outdoor activities, markets, and excellent restaurants. Narrabeen has a population of around 8,200 people, with 37% living in rented accommodation. 13
A significant portion of the residents are mature and established, yet there is still a high demand for properties to both purchase and rent. The reputation of and amenities associated with this suburb make it a prime property location.
Demand outstrips the available supply and the compound growth rate over 5 years has been 5% for houses specifically.
While the main barrier of entry is the average property price, Narrabeen is great if you have the funds and want to invest in something a little more certain. The growth trend is favourable and the higher capital invested can lead to higher capital gains in the long run.
- Impressive year-over-year (YOY) and compound growth.
- Wonderful location with seaside amenities.
- High demand coupled with a high percentage of residents choosing to rent.
- Slightly lower rental yield.
- The much higher price point for houses.
Second best to invest in
- Median 3 bedroom house price: $1,720,000 14
- Year-on-year change in the median sale price: 27.4% 2
- Rental yield: 2.3% 14
Petersham is a mere 7km from the CBD with a modest population of 8,11115. Although the population is relatively small, it has a reputation as a busy and loud suburb that can feel cramped to its residents.
An impressive 42.22% of the residents make use of rental accommodation with a vacancy rate of 3.36%. Petersham has exceptional railway connectivity, but nevertheless experiences undesirably high levels of traffic. 15
The region is dominated by mature and established individuals, but young professionals come in second place. This may explain the very high percentage of rental accommodation. There is also a noteworthy social scene to further reinforce the appeal to the youth.
Petersham's neighbouring suburbs are often seen as more desirable to settle in, but Petersham itself is still popular amongst those that want to rent or can’t yet enter the property market. Your potential tenants may not be long-term, but there’ll be a slew of them to prevent high vacancy rates.
- A significant percentage of residents renting accommodation.
- Close to the CBD with excellent public transport.
- Well suited to those that like buzzing city life.
- Noise pollution can affect livability.
- The suburb has been referred to as cramped or dense.
- Intense traffic if not using the railway system.
The best to invest in
- Median 3 bedroom house price: $1,555,000 16
- Year-on-year change in the median sale price: 39% 9
- Rental yield: 2.11% 16
Topping our list for investment potential is North Epping. This suburb provides a mixture of relative affordability, impressive year-on-year growth, and a desirable location.
Approximately 20km from the city centre, this suburb boasts exceptional public transport connectivity. This might be the main attraction to the suburb, other than the beautiful greenery.
North Epping has a modest population of 4,528 people with 12% of its residents living in rental accommodation. There are very few available properties for rent or purchase. This is coupled with a very high demand rate, compared to the other list entries. 17
Older and established couples and families dominate the local demographic. It may be more difficult to find tenants, but the YOY change in sales prices still makes it a worthy investment in terms of capital gains.
- Exceptional public transport options.
- Noteworthy increase in sales prices yearly.
- Properties are in high demand.
- Less known as a suburb for renters.
- Few available properties to buy.
If you’re looking to become a landlord for your new property, you’ll need to know what it is your potential tenants are looking for. This can greatly help in finding a property that is viewed as desirable by them. Viewing the house from their perspective can really help in your decision-making. That’s not to say that the analytical data isn’t important.
As much as the numerical indicators are important (and not to be ignored), knowing the suburb yourself counts for a lot.
Make sure you are financially stable and comfortable enough to make such a big commitment in a market as expensive as Sydney. You can also never be too educated on the market and its trends.
1 Realestate.com.au. "Bexley, https://www.realestate.com.au/neighbourhoods/bexley-2207-nsw”. 25th June, 2021.
2 Domain.com.au. "The Sydney suburbs defying gloomy COVID-19 forecasts: Domain House Price Report,https://www.domain.com.au/news/the-sydney-suburbs-defying-gloomy-covid-19-forecasts-domain-house-price-report-1000811/". 31st October, 2020.
3 Real Estate Investar. "Investment Property Bexley, NSW, 2207, https://www.realestateinvestar.com.au/Property/bexley". 2nd July, 2021.
4 Realestate.com.au. "Coogee, https://www.realestate.com.au/neighbourhoods/coogee-2034-nsw". 25th June, 2021.
5 Property Value. "Coogee NSW 2034, https://www.propertyvalue.com.au/suburb/coogee-2034-nsw". 27th June, 2021.
6 Real Estate Investar. "Investment Property Coogee, NSW, 2034, https://www.realestateinvestar.com.au/Property/coogee". 2nd July, 2021.
7 Smart Property Investment. "COOGEE - SUBURB PROFILE REPORT, https://www.smartpropertyinvestment.com.au/data/wa/6166/coogee". 2nd July, 2021.
8 Realestate.com.au. "Cronulla New South Wales 2230, https://www.realestate.com.au/neighbourhoods/cronulla-2230-nsw". 25th June, 2021.
9 Domain.com.au. "Where Sydney house prices are rising and falling the most, https://www.domain.com.au/news/dozens-of-sydney-suburbs-record-double-digit-price-growth-during-pandemic-domain-1021225/". 30th January, 2021.
10 Real Estate Investar. "Investment Property Cronulla, NSW, 2230, https://www.realestateinvestar.com.au/Property/cronulla". 2nd July, 2021.
11 Realestate.com.au. "Narrabeen New South Wales 2101,https://www.realestate.com.au/neighbourhoods/narrabeen-2101-nsw". 25th June, 2021.
12 Smart Property Investment. "NARRABEEN - SUBURB PROFILE REPORT, https://www.smartpropertyinvestment.com.au/data/nsw/2101/narrabeen". 2nd July, 2021.
13 Real Estate Investar. "Investment Property Narrabeen, NSW, 2101, https://www.realestateinvestar.com.au/Property/narrabeen". 2nd July, 2021.
14 Realestate.com.au. "Petersham New South Wales 2049, https://www.realestate.com.au/neighbourhoods/petersham-2049-nsw". 25th June, 2021.
15 Real Estate Investar. "Investment Property Petersham, NSW, 2049, https://www.realestateinvestar.com.au/Property/petersham". 2nd July, 2021.
16 Realestate.com.au. "North Epping New South Wales 2121, https://www.realestate.com.au/neighbourhoods/north-epping-2121-nsw". 25th June, 2021.
17 Real Estate Investar. "Investment Property Epping, NSW, 2121, https://www.realestateinvestar.com.au/Property/epping/2121/parramatta/nsw". 2nd July, 2021.