Australia’s property market clearly shows the benefits of entering a market at the right time.
- Sydney continues to offer the highest returns in the Australian property market
- Strong capital growth is now beginning to question its potential for future investment
- Investors need to find urban markets that are at the beginning of their growth trajectory
City centre property investment continues to outperform other asset classes.
New figures from Australia show the prime urban market of Sydney recorded capital growth of 3% in March alone – more than double that of the nation’s average.
According to the CoreLogic RP Data Home Value Index, Australian property is offering an annual rate of growth of 7.4%, while values in Sydney have increased 5.8% on a quarterly basis and 13.9% on an over the course of the year.
Sydney has been the only housing market down under that investors have considered, as it has offered growth at twice the pace of any other city. Melbourne is the next strongest performer and has displayed annual capital appreciation of 5.6%.
Monthly yields mirror capital growth, with Sydney recording an annual increase of 3.3%. In contrast, Perth has seen weekly rents fall 4.1% over the past 12 months.
Although there are signs the Sydney market’s strong capital growth is both compressing yields and restricting the purchase of new property assets, its past performance does highlight the value of investing in city centres.
It is a similar case in many developed nations. In the UK for example, London has offered phenomenal capital growth over the past few years, but high asking prices severely restrict the capital’s investment potential. Investors continually look for cities on the start of a major growth curve, such as Manchester and Southampton.
Signs of future property value and yield growth include strong regional economic performance, infrastructural investment and a growing tenant market.