When it comes to property selection, are there better returns for investors in old, established suburbs or new, up and coming areas?
By BEN POWER
Conventional wisdom holds that older, established suburbs outperform newer suburbs in capital growth. But newer suburbs deliver higher yield.
This is backed up by data. According to Australian Property Monitors (APM), for the past 10 years, prices for three-bedroom homes in inner suburbs, which are older, have risen by 92 per cent, middle suburbs by 73 per cent, and outer suburbs, typically newer ones, by 76 per cent.
Matthew Hardman, head of portfolio management and research at Rismark, says established suburbs don’t get higher capital gains because they’re older, “…it’s because they tend to be closer to the CBD and good transport”.
“You may have very old suburbs very far from the CBD that don’t perform better.”
He says older suburbs have less supply because no new houses are being built. With a growing population, that means they rise up the wealth and income brackets.
Meanwhile, Angie Zigomanis, senior analyst of residential property at BIS Shrapnel, says old suburbs might get better capital gains but you’re usually trading off yield for capital growth.
“You’re more likely to get higher yield in outer suburbs,” he says
Hardman says the reason newer suburbs yield more is simple: yields tend to decrease as prices rise. Prices in newer suburbs tend to be lower, so yield more.
See API’s August issue for a more in-depth comparison between old and new properties, or else leave your thoughts on which makes the best investment below.