Follow us as we take a rear mirror look at which properties – and locations, have delivered the best gains.
Strong capital gains are often regarded as the ‘holy grail’ for property investors. Outstanding returns have been achieved by landlords even in periods when the overall market has experienced slow conditions.
But when it comes to determining who has made the most from bricks and mortar, location and the type of property can play a big role.
Gains of almost 20% annually
In one study by RP Data, the largest property price gains over the past five years were recorded across regional markets – particularly those associated with the mining sector.
The Pilbara region of Western Australia for instance notched up capital growth of 19.8% annually over the five years to May 2013.
However with the resource sector moving out of a once-in-a-generation boom, many mining towns are seeing a slowdown in demand. The days of supersized gains in these areas could be behind us.
1-year gains – Sydney tops the league tables
When it comes to healthy returns over the past 12 months, it’s hard to go past the Sydney residential market.
Again referring to RP Data research, in the 2013 calendar year Sydney house owners enjoyed price gains of 15.2%. That’s well above the average across Australia’s eight capital cities of 9.8%.
Perth houses weren’t far behind with an average value increase of 10.2%.
One-year returns always make for interesting reading however most of us hold onto properties for far longer.
So let’s look at the 5- and 10-year gains around the country.
This is where the picture becomes far more diverse, indicating how metropolitan markets around the nation can perform very differently the longer term.
Over the last five years for instance, RP Data figures show the frontrunner for returns were Sydney houses (growth of 6.8% per annum). Broadly speaking, units haven’t fared as well. That said, the 5-year returns for Melbourne apartments are on par with the gains for houses – both achieving returns of 6.4% pa.
…and over the very long term…
If we stretch the investment timeframe to 10 years, Darwin and Perth stand out as the most rewarding locations.
Over the last 10 years Darwin takes the lead. Units in the top end capital earned juicy capital growth averaging 9.2% annually compared to 9.0% for houses. Second placegetter – Perth houses, racked up annual gains of 8.0% (units 7.0%).
The past is no guide for the future
The nub of it all is that different residential markets move in cycles, and in a nation as diverse as Australia it’s no surprise that property values nationwide don’t move in sync.
With this in mind, when it comes to making money on your next property, the rule of thumb is to buy in an area you can afford that offers prospects for ongoing growth.
Importantly, remember that yesterday’s returns are not a guide for future capital growth. Markets change quickly, and when it comes to investing, yesterday’s frontrunner can easily become tomorrow’s also-ran.
Check out Aussie’s free Property Investing Guide for more ideas on getting a great return on your next property.
Winners are grinners – are you one of them? If you have entered the market as an investor share your best investment tips with us via the comments below!
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