Where is the best place to buy my next investment property in Australia?

If you had $1 million to spend on property investment in Australia today, where would you invest it? What location would you choose, and why? And if your budget was only $500,000, where is the best place to buy an investment for that amount?

And by the way, is real estate still a good investment in Australia, especially after the spectacular pandemic-induced boom we’ve experienced and the slowdown we’re now anticipating?

These are common questions that a journalist recently asked me, and I can understand why – they make for great headlines and reflect what many investors are asking today.

Note: Everyone wants to know how to identify the best property investment locations or Australia’s best-growth suburbs—the ones that will outperform the averages. And they believe the right property in these locations will be the stepping stone to building a substantial property empire.

However, my response likely disappointed the journalist, because I didn’t directly answer his questions.

I wasn’t surprised by the request though – many property investors begin their journey by trying to pinpoint a top location (thinking that’s the best place to buy an investment property) or find that ideal property that will make a great investment.

But when you look at the results most investors achieve by focusing on these types of questions, it becomes clear that this approach doesn’t always lead to success.

Statistics show that around 50% of all property investors sell up within the first five years, and of those who stay in the market, 92% never get past their first or second investment property.

So, if you want to outperform the average investor and develop financial freedom through property investing, don’t start by selecting a location or hunting for the ideal property.

Purchasing property for investment purposes

You see, property investing is a process, not just an event. Things need to be done in the right order, with selecting the property coming at the end of the process.

The property you eventually purchase will be the result of a series of questions you need to ask and answer, along with a sequence of decisions you’ll make before even considering locations.

At Ash Buyers Agency, long before we discuss properties or the right location with our clients, we consider factors such as their age, timeframes, and desired results—what they want the property to do. Are they seeking cash flow, capital growth, or a combination of both?

What makes a great investment property for me may not be the same as what suits your investment needs. That’s why it all begins with helping our clients formulate a Strategic Property Plan. This plan accounts for their surplus cash flow, risk profile (such as whether they’re open to renovations or small development), future income changes, whether they currently own a home or plan to upgrade their existing home, and many other considerations.

For anyone asking where to invest, my first recommendation is to sit with an independent property strategist to formulate their plan. It’s simply too difficult to do on your own, and I’ve found that most investors become too emotionally involved to see their situation objectively.

A tailored approach with expert advice is key to making the right investment decisions, and that’s what we provide at Ash Buyers Agency.

The benefits of formulating such a plan are numerous:

It will help you define your financial goals clearly.

You’ll discover whether your goals are realistic, especially within your specific time frame. You’ll gain insight into what you’ve done right, what you could improve, and what actions you can take to move forward. You’ll be able to measure your progress towards your goals and assess whether your property portfolio is working for you, or if you’re working for it. Your plan will help in identifying risks you may not have considered.

Your Strategic Property Plan should include the following key components:

• An asset accumulation strategy
• A manufacturing capital growth strategy
• A rental growth strategy
• An asset protection and tax minimization strategy
• A finance strategy, including long-term debt reduction
• A living off your property portfolio strategy

By following a documented plan, the real benefit is that you’ll be able to grow your wealth through your property portfolio faster and more safely than the average investor, without making costly mistakes along the way.

Three important parts of your investment equation

When you invest in property, there are only three major levers you can pull:

1. Your budget, is typically determined by the banks.
2. Location, and you can’t afford to compromise on that.
3. The right property in that location.

Unless you have an unlimited budget, which applies to very few of us, investors often need to compromise on at least one of these factors.

However, the question some potential investors are asking, amidst all the mixed messages in the media, is:
How do you make the most attractive and convincing decision to secure the best investment?

Is real estate still a good investment?

Sure, there are some headwinds ahead and many economic challenges to navigate.

Yet, I see the current market offering a unique opportunity for property investors with a long-term focus.

We’re at the beginning of a new property cycle, which doesn’t happen often. While I don’t suggest trying to time the market—this is too difficult, and in truth, you’ve already missed the bottom that occurred in early 2023—if the market presents an opportunity like this, why not take advantage of it?

Taking advantage of the upturn stage in a new property cycle has created significant wealth for investors in the past. Moving forward, demand will outstrip supply for some time due to record levels of immigration, at a time when we’re not building nearly as many properties as needed.

At the same time, the cost of construction will continue to rise, driven not only by supply chain issues and a shortage of skilled labor but also because builders and developers will only start new projects if they are financially viable. Currently, new projects will need to come online at considerably higher prices than the current market price.

Eventually, consumer sentiment will rebound when inflation continues to fall and interest rates peak. At that point, pent-up demand will be released as greed (FOMO) overtakes fear (FOBE – Fear of buying early), as it always does when the property cycle progresses.

Strategic investors will take advantage of the opportunities our property markets present over the next few years, maximizing upsides while protecting downsides. We’ll also experience a prolonged period of strong rental growth, with the rental crisis worsening further, showing no signs of stopping.

I’m not suggesting taking advantage of tenants, but rather recognizing the current problem (lack of rental accommodation) and providing a solution. Instead of hunting for a bargain, focus on buying an investment-grade property in an A-grade location. These properties are in short supply but are still selling for reasonably good prices and will hold value far better over time.

While it may feel counterintuitive to buy when mixed messages are dominating the media, you can benefit from less competition, low consumer sentiment, minimal downside risk, and minimal risk of oversupply.

Note: Now that we’ve entered the next phase of the property cycle, there’s a clear flight to quality properties, with an increased emphasis on livability.

As buyers’ priorities shift, some may be willing to pay a bit more for properties that offer “pandemic appeal,” additional space, and increased security. However, it’s not just the property itself that will need to meet these evolved needs—a liveable location will play a significant role too.

For many, liveability will be an attractive combination of:

• Proximity to parks, shops, amenities, and good schools
• Mobility, with access to public transport (although this may become less important in the future) or a well-connected road system
• Easy access to jobs

An area with these features will become even more convincing for those looking to meet their evolving needs.

What makes a worthwhile investment property?

This question is difficult to answer because it depends on you – what do you want to achieve with your property investment?

It’s impossible to claim that any single location is perfect for everyone.

If you’ve been following my blogs, podcasts, or videos, you’ll know that I consider residential real estate to be a high-growth, relatively low-yield investment. That’s why I focus on locations that are likely to outperform the averages in terms of capital growth over the long term.

However, I recognize that most investors need sufficient cash flow to service their debt, so yield is also an important factor when choosing a location.

When selecting a location, I begin by eliminating certain areas.

For example, I wouldn’t invest in regional Australia or smaller capital cities.

While some high-performing regional locations or certain suburbs in smaller capitals may outperform the weaker-performing suburbs in our three major capital cities, I still believe that focusing on Australia’s big three capitals is crucial. Within these cities, though, you need to be very selective in choosing investment-grade suburbs that have the potential to outperform.

Instead of focusing on past performance, I look for leading indicators that signal what is likely to happen in the future.

I look for locations with strong economic growth, which typically leads to wage growth and, eventually, population growth.

But beyond that, I seek out areas with an affluent demographic, who are both able and prepared to pay more to buy or rent in these suburbs.

Tips: The fact is, I don’t like to fight the big trends.

Key drivers of capital growth include supply and demand, infrastructure, livability, and amenity.

Over the years, I’ve noticed that experienced investors find it easier to choose a location – they’ve learned from mistakes and don’t become emotionally attached to areas.

On the other hand, many beginner investors want to invest in locations close to where they live, in suburbs they’re familiar with, or where they’d like to eventually retire or holiday.

These are emotional reasons for choosing a location, rather than making data-driven decisions based on market fundamentals.

So, the first question you need to ask yourself is:

“How far are you willing to invest from home?”

The further you’re willing to look, the better your potential returns, as you’ll have the whole of Australia open to you. But if you’re only prepared to invest in your own backyard, your choices will be much more limited.

While there are around 3,800 statistically reliable suburbs nationwide, very few of them are investment-grade suburbs capable of delivering wealth-producing rates of capital growth.

How to choose an investment property in Australia?

I recommend focusing on areas with a proven history of strong capital growth that are likely to continue to outperform the averages. This is very different from chasing after a “hot spot” or the next big trend many beginning investors often pursue.

As you dive into the data, you’ll quickly discover that not all land is created equal. Some suburbs will naturally be more popular than others, some areas will experience more scarcity, and over time, some land will increase in value at a faster rate.

Top performance in these areas is often linked to the demographics of the region. Suburbs with a large number of owner-occupiers who choose to live there due to lifestyle choices or other attractive factors tend to perform the best.

I specifically look for suburbs where wages—and therefore disposable income—are growing above the average. These locations typically fall into one of two categories:

1. Discretionary locations
   These are the most expensive areas in our capital cities—referred to as “established money” locations. Most residents have lived here for a long time, and many have paid off their home loans years ago. Generally, these are the established inner-ring suburbs or suburbs close to water. Over the long term, this market segment consistently outperforms others.
2. Aspirational locations
   These are upper-middle-class areas and gentrifying locations in our major cities. Suburbs where affluent millennials are looking to move as they enter the family formation stage. As this wealthier demographic moves into an area, it increases the potential for a premium price, helping to put a financial floor under your investment property.

In these areas, you’ll notice a changing neighborhood, with new developments and improved infrastructure enhancing the quality of services for residents. This not only drives up the standard of living but also fosters economic and job growth.

In contrast, I’d advise against investing in more affordable locations. This end of the property market typically underperforms in terms of capital growth and rental growth, as many owners—often young families—are stretched to their financial limits and maybe just a few weeks away from financial hardship.

What to look for when investing in property?

If Covid-19 taught us anything, it was the importance of living in the right type of property in the right neighborhood.

In our new “COVID Normal” world, people are willing to pay a premium for the ability to work, live, and play within a 20-minute reach of their home. They seek access to essential community facilities, recreational spaces, sporting resources, education, and even jobs all within that 20-minute radius.

Residents in these neighborhoods now truly appreciate the convenience of being out on the street, socializing, supporting local businesses, engaging with local schools, and enjoying well-maintained parks.

However, location isn’t the only key factor.

While I believe that 80% of your property’s performance depends on its location, the other 20% is tied to buying the right property in that location.

Even in the best suburbs, there are properties I would avoid—they simply don’t make good investments. Conversely, there are others I would be eager to add to my portfolio.

Generally, properties can be categorized into three types:

A-grade homes and investment-grade properties are the type of assets you want to own. These properties attract great tenants who choose to live there, not out of necessity, but because they want to—and they’re prepared to pay a premium for the privilege. These include family-friendly homes and apartments in great neighborhoods.

B-grade properties still perform well, especially in hot property markets like the one we’re currently experiencing. However, their second location within the suburb or other less-than-ideal characteristics may cause them to slump more in downturns when buyers and tenants become more selective.

C-grade properties should be avoided unless they’re situated in a great neighborhood, and your plan is to demolish and replace them with something more appropriate for the area.

When selecting an investment-grade property, consider the following factors:

I’m a firm believer in buying properties below their intrinsic value, which is why I avoid new and off-the-plan properties that often come with a premium price tag. I also seek properties with a high Land to Asset ratio—though keep in mind that apartments do have an attributable land value beneath them.

I love properties with a twist. Your investment must have something unique, special, different, or scarce—an “X-factor” that makes it stand out from its neighbors to land on my shortlist. For those who can afford it, I also recommend buying properties where you can manufacture capital growth through renovations or redevelopment.

Rather than focusing on where to invest or what property to buy, the important questions you should ask are:

• What do I want to achieve from my property portfolio?
• What do I need to do to get those results?
• Who do I need on my team to help me achieve financial freedom with minimal risk?

Top investment property locations in Australia

As mentioned earlier, if your goal is to outperform the average investor and achieve financial freedom through property investing, your focus shouldn’t begin with searching for the best place to buy an investment property or seeking the ideal property.

What are often deemed the best places to buy an investment property in Australia, or the best places to invest, don’t necessarily lead to the best investment decisions. Remember, not every property qualifies as investment-grade, and even in so-called ‘investment suburbs,’ there will be certain locations to avoid while other neighborhoods will outperform.

At Ash Buyers Agency, we understand that every client has unique circumstances, goals, and aspirations, and we believe in providing tailored guidance rather than a one-size-fits-all approach to investing. Because of this, I don’t believe in chasing hotspots or investing in an area just because it’s expected to be the “Next Best Thing.”

“Hot spots” often turn into “not spots,” and as a long-term investor, I focus on taking calculated risks rather than gambling.

Instead, I’ve curated a list to serve as a reliable guide for investors seeking long-term growth. Here are the top 5 suburbs in Sydney, Melbourne, and Brisbane that could be considered strong investment suburbs for some investors.

These suburbs meet my strategic criteria:

• Located within 15km of the CBD
• Exceeding the Australian median weekly household income of $1,164.60, indicating above-average household and disposable income
• Achieving a good or above-average Demand Supply Ratio (DSR)
• With a population exceeding 6,500
• Rated as ‘Very Walkable’ with a Walk Score of 70+

I want to emphasize that these suburbs aren’t universally suited for every investor seeking fail-safe long-term growth—those types of lists aren’t what I trust. They’re not the only suburbs worth considering.

Every client we meet at Ash Buyers Agency receives a tailored recommendation based on their unique circumstances and personal goals because there’s no blanket approach when identifying the best investment property locations.

That said, these suburbs have been selected for their proven stability, consistent historical growth, and the right demographics that suggest reliable, future long-term growth. All of these suburbs are within the inner-middle rings of Sydney, ensuring a strategic focus that avoids speculative or hot-spotting investing. They’re all smart investments with a proven track record of sustainable growth and strong future potential.

The 5 best Sydney suburbs to invest in

Coogee

Distance from CBD: 8km South East
Total Population: 14,012
Median Household Income: $2,099 per week

Kingsford

Distance from CBD: 7km South East
Total Population: 14,100
Median Household Income: $1,227 per week

Kensington

Distance from CBD: 6km South East
Total Population: 12,776
Median Household Income: $1,498 per week

Maroubra

Distance from CBD: 10km South East
Total Population: 29,594
Median Household Income: $1,428 per week

Neutral Bay

Distance from CBD: 1.5km North
Total Population: 9,384
Median Household Income: $2,073 per week

These areas are all highly desired for their central location, proximity to the CBD, and vibrant communities. Coogee and Neutral Bay stand out with a high median household income, while areas like Kingsford and Kensington offer attractive options for family-friendly living. The proximity to the CBD and the strong local amenities make these suburbs some of the best for both lifestyle and investment opportunities.

Note: As a property investor and similarly as a homeowner, it is important to note that location accounts for 80% of the property’s performance and 20% come from the property itself.

Meaning, that with the correct location and property selection you can find an investment-grade asset that well and truly outperforms the averages in growth.

Are you wondering how you should invest in this interesting phase of the property cycle?

If you’re like many property investors, you’re likely wondering what the best course of action is right now. Should you buy, sell, or simply wait?

You can trust the team at Ash Buyers Agency to provide you with direction, guidance, and results every step of the way.

Whether you’re a beginner or an experienced investor, in times like these, you need an advisor who takes a holistic approach to your wealth creation—and that’s exactly what you’ll find with the multi-award-winning team at Ash Buyers Agency, offering you the most attractive and convincing strategies for success.

For more information or to get in touch with us, please feel free to reach out. We are the best buyer’s agent in Sydney You can contact us at +61 434 111 200. We look forward to assisting you with all your property investment needs.