Karama in Darwin has been named the best suburb for cashflow.
Karama in Darwin has been named the best suburb for cashflow.

Depressing real estate revelation

EVEN property investors have been priced out of the market.

There are "currently no suburbs" in Sydney, Melbourne or Canberra where an investor can buy a detached house and expect it to be cashflow positive with a deposit of 20 per cent or less, according to an analysis by Propertyology.

Releasing a list of the country's "best capital city cash cow suburbs", the research firm said buyers would have to travel to the Central Coast, 100km from the Sydney CBD, before finding an investment property with decent cashflow.

Even then, a median-priced $490,000 house in Lake Munmorah - the least worst "Sydney" suburb identified in Propertyology's list - will leave the investor $3093 out of pocket.

"Victoria paints a similar picture, with greater Melbourne's best locations for cash flow investors within the municipality of Melton - 40km northwest of the CBD," Propertyology head of research Simon Pressley said in a statement.

It comes as CoreLogic figures showed national dwelling values fell for the 11th consecutive month in August, led by weakness in the two major capitals that comprise about 60 per cent of Australia's housing market by value.

Negatively geared properties - when the rental return is less than the interest payments and other costs - are "okay when you're getting 10 per cent capital growth year in, year out", said AMP Capital chief economist Dr Shane Oliver.

But investors now face falling house prices, rising interest rates, tighter lending conditions and the possibility of a future Labor government cracking down on negative gearing and capital gains tax breaks.

"The equation gets more complicated," Dr Oliver said.

According to Propertyology, there are still "plenty of suburbs" in Australia's capital cities where high rental returns "make it easier on landlords to patiently wait for equity gains".

"In some locations, even with a low 10 per cent deposit, the typical property is putting money back into the owner's pocket each year," Mr Pressley said.

The analysis was based on median rents, interest expenses depending on whether an investor purchased with a 10 per cent or 20 per cent deposit, plus standard holding costs such as maintenance, council rates, insurance and property management fees.

The best suburbs nationwide were in Darwin and Hobart. "Australia's best capital city cash flow suburb is in Karama in Darwin, which is just 10km from the GPO and has a median house price of only $392,000," Mr Pressley said.

"This investment will generate a positive cash flow of $3600 per year if purchased with a 20 per cent deposit or $1700 per year using 10 per cent."

At the other end of the spectrum, an investor who purchased a median-priced $1.33 million house in Sydney's Hornsby would be $26,152 worse off at the end of the year.

Mr Pressley said cash flow was just one element in choosing an investment option.

"Fundamentals such as proximity to employment nodes, local demographics, and the various factors which affect housing supply are important considerations as well," he said. "Suburbs offering both high cash flow and capital growth potential are not common, but they can be found in every state."

Propertyology's top 40 cashflow suburbs.
Propertyology's top 40 cashflow suburbs.


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