The saying ‘capital growth is king’ has been the mantra of many a property investors for some time, because it’s usually followed by the tag line ‘because property prices double every seven to 10 years’.
While this is true for a time, property investors need to ask the crucial question: Can capital growth still be possible despite constant downward pressure on property values?
Angie Zigomanis, senior consultant at BIS Sharapnel, says investors have every reason for concern.
“Capital growth over the next 12–18 months is going to be relatively weak given the economic environment. So it is a risk trying to buy in now to try to flip something in the next 12 months,” he says. “Investors need to be looking at least medium term to long term in order to achieve some capital growth going forward.”
If you’ve got the buying capacity, now is by far the best time in a long while to take your property portfolio to the next level, Zigomanis says.
“Out of pocket expenses are considerably less in 2009 thanks to higher rental incomes and lower interest rates,” he says. “Investors should take the opportunity to buy now and pay down the debt on their property while it’s cheaper to do so. Then when the market begins to rise again, they can draw out that equity and set themselves up well for the future.”
Zigomanis claims that even in tough markets there will be suburbs which thrive. It is important to ensure that the purchase meets all of your requirements.
Many suburbs have been able to reverse the downtrend over the last 12 months due to fundamental drivers such as affordability and infrastructure. According to RPData, some areas experienced phenomenal growth of around 50%.
“These are very bullish levels of growth,” says Cameron Kusher, senior research analyst for RP Data. “But there will be those suburbs that no matter what the economy throws at them or what the wider property market is doing, they’ll achieve these exceptional growth rates.”

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Growth drivers

Lifestyle factors
A property located near the city, ocean or other areas with spectacular views is a great investment. It has also achieved high capital growth. These properties also have a higher price. These areas have seen a decline in demand since the financial crisis. “This high-end market is subject to cyclical movements in the economy. Less people can afford to buy in the market during hard times,” Zigomanis says. “Those buying into the higher end lifestyle areas will need to adapt their expectations, because there is still a bit of uncertainty surrounding capital growth in the short to medium term.”
Zigomanis says that the demand for lower- and middle-priced lifestyles will rise in the short term. This will lead to capital growth.
“You’ve got prices that didn’t go up over the last two to three years in that part of the market and they’re due for a rise,” he continues. “They’re also much more affordable today than last year.”
Good infrastructure
The most successful suburbs have an established infrastructure that can support residents’ needs.
Kusher suggests you locate your property near existing or future infrastructure projects in order to increase the value.
“As capital cities continue to grow, there is going to be more demand for those well located suburbs within 20km of CBDs with good train, bus and freeway access,” he says.
Coolangatta, in particular, has greatly benefited from the Tugun Bypass. Since its opening in the mid-2008, it has helped ease congestion. Kusher reports that since January 2008, the housing market has grown by 40.48%.
Peter Koulizos serves as the coordinator for property and share investment. He points out that suburbs like Wynnum or Lota in Brisbane are likely to see an increase of demand. This is possible thanks to the Southeast Queensland Regional Plan 2009-2031. “In Brisbane good rail infrastructure is becoming essential for capital growth, because their traffic problems are getting worse day by day,” he says.
“The government is pouring lots and lots of money into locations close to major transport nodes, and they’re also offering re-zoning opportunities as well, which is great for investors,” says Koulizos.
“If you have a house in Wynnum a few hundred metres from the train station and there is only one house sitting on the site, new changes to zoning mean that you could potentially increase it value by putting four dwellings on that block.”
Gentrification 
It is possible that the suburbs will be gentrified in the near future. These areas were considered undesirable due to their poor reputation and working-class roots. These buyers are looking for properties within the vicinity of the city.
“These suburbs have not been highly sought after in the past because of the people that lived in the area and in some cases the industry in the area,” Koulizos says. “But when the people shift out of the areas due to increasing rents and house prices, and industry decide to relocate their best feature is unveiled – proximity to the city.”
Koulizos gives the following examples of inner city suburbs that are being gentrified: Erskineville (Sydney), Braybrook (Melbourne), and Thebarton (Adelaide)
“There are some classic telltale signs to let you know when these suburbs are beginning to turn around and go through that gentrification,” he says. “Homes in the area are being renovated and repaired, shop fronts are being updated, local council is working on the retail and lifestyle features, housing commissions are being relocated and the State or Federal Governments are approving and constructing new roads and upgrading tram or train lines.”
These areas have seen an increase in the number of buyers. Koulizos frequently checks the carpark at the local shopping center to find out if additional money is being moved.
“The suburbs may still be a little run down but you’ll notice, by looking at the cars that residents drive, that some young professionals for instance have moved into town, driving their Audis and BMWs. They just haven’t got around to fixing their lovely period homes,” he says.
Koulizos says Richmond, Melbourne is an example of an area in which this has been done previously. “Back in the 1960s and 1970s Richmond was popular with criminals and industry, and so the properties in the area was run down,” he says. “But because of its proximity to the city it slowly went through that gentrification period and the socio-economic demographic living in the area changed, lifting property values dramatically in the process,” he says.
Affordability
Kusher asserts that most of the current market activity is occurring in the lower price ranges. Most areas have prices below $500,000
“This will continue, particularly until the end of June when the First Home Owners Grant boost finished. Post June conditions are starting to look good for investors in this price range as well,” Kusher says. “If you’re looking to get capital growth in the next three- to five-year cycle, it will be achieved in the bottom end where there is scope to catch up.”
Zigomanis recommends that you search for key drivers in a suburb, such as prime location and infrastructure. These will increase the likelihood of you buying in that area.
“You need to buy with these characteristics so you get good tenant demand on top of capital growth. This means buying close to the CBD, train lines and major transport corridors, and possibly close to employment hubs and universities to keep tenant demand up,” he says.
Kusher suggests buyers focus on areas that are less well-off than their neighbors and find out why. Buyers will soon be able afford to live in the areas near hot spots.
“In Crows Nest for instance, there is a lot of commercial usage and the houses are quite small, but it still has that north shore address and is next door to North Sydney and the CBD. It also has all of those desirable amenities only at a lower price tag and that represents good value,” Kusher says.

These are the fastest-growing suburbs (12 Months)
Suburb

State

Type of property

Number sold

Median price ($).

Quartly growth

12-month growth
GREENWICH NSW Unit

30

490,000

n.a

49.85%
TERINGIE SA House

11

830,000

n.a

49.55%
DALLAS VIC Unit

10

222,500

0%

48.33%
UNDERDALE SA Unit

33

340,000

4.94%

47.83%
POINT MCMAHONS NSW House

12

1,675,000

-3.18%

47.45%
NORTH LAKES QLD Unit

30

460,920

16.69%

47.26%
TRUNDING QLD Unit

16

121,427

30.27%

47.18%
PARAFIELD GARDENS SA Unit

25

262,500

-0.94%

46.24%
PORT HUGHES SA House

11

400,000

14.61%

45.45%
SALISBURY QLD Unit

11

485,000

0%

44.78%
MIDDLE ROAD QLD Unit

11

300,000

n.a

44.58%
QUEANBEYAN EAST NSW Unit

11

365,000

-1.35%

44.55%
SOUTH HEDLAND WA Unit

13

455,000

0%

44.44%
UNDERWOOD QLD Unit

47

367,500

0.07%

44.12%
COOLBINIA WA House

12

1,331,000

33.1%

43.12%
RIVER HEADS QLD House

33

415,000

18.57%

43.1%
FERRYDEN PARK SA Unit

23

310,000

11.11%

42.53%
WALKERVILLE SA Unit

26

431,475

2.74%

42.4%
BANJUP WA House

10

1,329,000

10.75%

41.38%
WEST LAKES SA Unit

58

465,000

19.85%

41.31%
KINGAROY QLD Unit

28

211,000

0%

40.67%
COOLANGATTA QLD House

16

885,000

20.82%

40.48%
SALISBURY SA Unit

85

189,000

2.72%

40%
CAULFIELD EAST VIC Unit

12

352,500

5.22%

39.88%
KENSINGTON SA House

12

535,000

11.46%

39.38%
OXLEY QLD Unit

11

345,000

8.15%

39.11%
TENNYSON QLD House

11

697,500

-7.46%

39.08%
TOORAK GARDENS SA Unit

25

326,000

8.67%

38.72%
PORTSEA VIC House

35

1,455,000

-3%

38.57%
JINDABYNE NSW House

12

482,500

11.56%

37.86%
LOCKHART NSW House

12

120,000

11.63%

37.14%
MOUNT EVELYN VIC Unit

13

344,000

18.62%

36.92%
MURWILLUMBAH NSW Unit

16

175,000

31.09%

35.66%
IRYMPLE VIC Unit

12

194,500

2.10%

35.30%
ST ANDREWS VIC House

11

500,000

1.52%

34.68%
SOUTH HEDLAND WA House

58

520,000

3.48%

34.37%
MOUNT HAWTHORN WA Unit

11

604,000

0.33%

34.22%
ROSEHILL NSW Unit

21

305,000

2.52%

34.07%
ECHUCA SOUTH VIC House

17

410,000

12.33%

33.99%
GILGANDRA NSW House

38

144,000

10.77%

33.95%
DUBBO NSW Unit

50

183,500

17.63%

33.21%
MELTON WEST VIC Unit

19

238,000

3.03%

32.59%
APPLECROSS WA House

34

2,250,000

7.14%

31.96%
TAMARAMA NSW Unit

26

880,000

3.23%

31.34%
EAGLEMONT VIC House

25

1,205,000

0.29%

30.62%
BOX HILL VIC Unit

83

377,500

0%

29.73%
NORTH BEACH WA Unit

18

837,500

19.64%

28.85%
KALGOORLIE WA Unit

16

297,000

6.07%

26.38%
KARAWARA WA House

15

718,000

-1.31%

25.74%
EAST FREMANTLE WA House

39

1,250,000

0.81%

22.55%

Source: RP Data

These are the top performers

NSW – Rosehill

  • The public transport system is great
  • Growing infrastructure
  • Access to amenities
  • Lifestyle
  • CBD is very close to you
  • Increasing Population
Leafy Rosehill, in Sydney’s west, experienced almost 35% capital growth in unit prices over the 12 months to January this year, largely thanks to increased amenities and infrastructure being injected into the area.
Lisa Surian, director of Raine and Horne – Parramatta, says a train line that now links Rosehill to the northwestern and southwestern areas of Sydney from Carlingford to Clyde has been a big growth driver for the area. Surian also says that the area’s excellent public schools have encouraged renters and buyers to buy in it, leading to substantial growth over the past one year.
“There are a lot of families that are renting in the Rosehill area so that their kids can get a good education,” Surian says. “Now that rents are increasing and buying conditions are getting better, these families are buying into the area so they don’t disturb their kids’ education.”
Surian mentions that Rosehill attracts many immigrants to the area because it is near Parramatta and other amenities.
“We’re at a stage where rental property vacancies are less than 1% in a rental market which is continuing to firm up. Yields are around 5%, which is a great incentive for investors,” she says. “Buyers can pick up a two bedroom unit for between $320,000 and $360,000 renting for $330–$350 a week.”
Surian suggests investors invest in Rosehill with a view to the long-term. “You can’t just come into the market and out again expecting to achieve huge amounts of growth.”

Suburb

State

Type of property

Number sold

Median price ($).

Quartly growth

12-month growth

Weekly median advertised rent ($).

Gross rental yield
 Rosehill NSW  Unit 21 305,000  2.52% 34.07% 400 6.82%
QLD – Tennyson
  • CBD is close by
  • Stabilizing infrastructure
  • Water’s proximity
The riverside suburb of Tennyson is located just 5km from Brisbane’s CBD and has recently been boosted by the construction of an international tennis centre.
Nanette Lilley, principal and owner of Nanette Property Centre – Graceville, says the anticipation of the new centre helped boost the local house market exceptionally over the year to January. According to RP Data Tennyson house prices have increased by nearly 40% in the last 12 months.
“There have also been luxury high rise units built next to the new tennis centre, priced between $900,000 to $3m plus, which has encouraged activity in other areas of the market,” Lilley says.
According to Lillley, the Tennyson property market is made up of a mix of riverfront properties worth millions and homes that rent for $300-400 per week.
“Now that tennis centre has gone in, there has been increased number of people into the area and the cheaper houses are in high demand. So this is going to add increased pressure on prices going forward and really Tennyson on the map,” she says.
Tennyson is a well-known suburb due to its proximity to the Yeronga Shopping Centre (and train station), both located next door.
Lilley claims there is an ongoing growth opportunity for investors, particularly those who want to buy houses on the less expensive streets near the river front and then renovate for profit.

Suburb

State

Type of property

Number sold

Median price ($).

Quartly growth

12-month growth

Weekly median rent ($)

Gross rental yield
 Tennyson QLD House 11  697,500 -7.46% 39.08%  380 2.83%
SA – Kensington
  • Transport public
  • Access to amenities
  • CBD is close by
  • Lifestyle
Adelaide’s rising star, Kensington has experienced a substantial boost to its median house price over the past 12-months to January. The suburb is only 4km away from the city, and it is known for its many amenities and lifestyle features.
Max Wundersitz is Ray White Norwood’s director. He says that Kensington has a mix of old-style single row cottages as well as home units. The high demand for these dwellings has driven prices up due to a limited supply.
“Buyers want to buy in the suburb because it has two good schools, great shops, pubs and cafes, and they can just walk or ride their bikes into the city,” he says. “We also have Norwood nearby which holds markets and festivals all year round and these are very popular.”
Wundersitz says buyers in Kensington’s housing market are willing to pay a premium to secure an address close to the highly regards local public schools.
“There has always been sound growth in Kensington and it will continue to be a sounds investment into the future,” he says.
Bridge Street, High Street, and High Street are some of the most well-known streets.

Suburb

State

Type of property

Number sold

Median price ($).

Quartly growth

12-month growth

Weekly median rent ($)

Gross rental yield
 Kensington SA House 12 535,000 11.46%  39.38% 350 3.4%
WA – East Fremantle
  • Stabilizing infrastructure
  • Housing supply is low
  • Expanding the resources sector
  • Increasing population
  • Water’s proximity
South Hedland is a coastal mining community that has seen capital growth in the face of the commodities crisis. According to RP Data houses have seen a 34.37% increase in capital growth since January.
On top of this, the increased demand for workers for the upgrade of local mines has allowed rental yields to skyrocket to levels between 10–12%.
“BHP is bringing in another 3,000 workers into the town, to complete its huge expansion project here,” says Jan Ford, principal of Jan Ford Real Estate – Port Hedland and Branch chairman of the Real Estate Institute of Western Australia – Pilbara area. “So the most recent growth has come from people buying investment properties looking to take advantage of the fact that there are only 5,200 houses in Port Hedland and an overriding demand for 15,000 houses.”
The attractive coastal line in South Hedland is a benefit to both tenants and owners who are looking for a residential area.
Ford claims that the Port Hedland city council has begun a plan for sustainable long-term growth, in response to the possibility that the town’s single industry could be affected by economic variables in future.
“We plan to have 10 major industries in the next 10 years including a financial services industry, a green technology industry and a bigger tourism sector,” she says.
An investor can purchase a three-bedroom house for $500,000 to earn $1,000 per week in rental returns. The cost of newer homes is likely to be around $1million. They also bring in $2,000 per semaine in rental income.
Ford states that strong gentrification has made the area of Walnut Drive and Lawson the best areas of South Hedland for future growth.
“A lot of the older areas and houses are being revamped,” she adds. “South Hedland is really growing. A lot of the older houses are being revamped and the council has set aside $80 million for infrastructure and $23 million for a town upgrade in the area.”

Suburb

State

Type of property

Number sold

Median price ($).

Quartly growth

12-month growth

Weekly median rent advertised ($)

Gross rental yield
 South Hedland WA House 58 520,000 3.48% 34.37% 950 9.5%
VIC – Melton West
  • Stabilizing infrastructure
  • Access to amenities
  • Increasing population
Growth in the Melton region, 35km west of Melbourne, has been building strongly over the past five years, says Justin Carberry, senior sales consultant at Jen Gaunt – Melton. According to RPData, units in Melton West have seen 32.59% growth in the 12 months prior to January.
Carberry states that the western and southern parts of Melton have seen a lot of gentrification, which has greatly contributed to the rise in property prices.
“The Government is spending upward of $15 billion on the Melton area setting it up as a big residential hub for the west of Melbourne. There is expected to be around 200,000 people living here in the next 10–15 years, so capital growth should continue,” she says. “The Deerpark Bypass has also recently opened up shortening the trip from Melton into the CBD from over an hour to around 40 minutes.”
Melton West boasts three high schools as well as three primary schools. It also benefits from the many shopping centres located in and around the area. Woodgrove Shopping Centre, the largest and most recent of the lot, will be constructed in five stages. Stage 1 is now completed.
Increasing demand for dwellings in the area is another key growth driver for the Melton thanks to its affordability – especially in Melton West where many houses are new stock.
“You can buy a 600-metre-square block of land for between $110,000– $130,000 in Melton West,” he says. “Growth in the west of Melton is also driven by its good reputation and the fact that titled land is very scarce but there looks to be more coming onto the market in the next 12 months.”
In the Melton West area, 19 units were sold between December 2008 and December 2008. The house market however was where there was most activity. During the same time, 251 houses were sold in Melton West.
Houses in Melton West are currently selling for between $220,000–$230,000 and renting for around $250 a week.Units sell for under the $200,000 mark, although a limited supply means strong competition for the stock that comes on the market.
Carberry suggests that investors consider buying new homes to take advantage depreciation. The West Lakes estate and Arnold’s creek are two very popular area of West Melton he says.
“Anywhere over the Western Freeway would be a great investment also, for those buyers who would like to capitalise on the renovation potential of existing houses priced between $180,000–$190,000.”

Suburb

State

Type of property

Number sold

Median price ($).

Quartly growth

12-month growth

The median weekly rent is advertised ($)

Gross rental yield
Melton West VIC Unit 19 238,000 3.03% 32.59% 250 5.46%

Check out our checklist of high-growth areas

  • Create a hit list of towns – experts recommend populations of around 10,000 plus due to added diversity of industry
  • Are these towns still growing – population, median prices, rental yields, planned infrastructure or mining exploration?
  • Check out websites and subscribe to free property data – ANZ Regional updates, RP Data suburb profiles, ABS Census data and PRD Nationwide property research updates
  • What’s driving the economy?
  • It is important to look for areas that are diverse in economy and can support multiple industries.
  • What major industries support the area – who is the major employer and are they growing or falling apart?
  • Check government websites – Is new infrastructure bringing traffic into or away from town? Is money being invested in the area’s amenities and services?

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