Where Should You Buy a Property as an Investment in Australia?


If you had $1 million to spend on property investment in Australia today, where would you invest it?

What location would you buy-in, and why?

And what about if you only have $500,000 to invest?

Where is the best place to buy an investment for this budget?

And by the way… is real estate still a good investment in Australia, considering the spectacular pandemic-induced boom we’ve experienced in the past couple of years and the slow down that we’re now expecting?

These questions were recently posed to me by journalists, and I can understand why – they are common questions investors are asking today and they make great headlines for articles.

Everyone would like to know how to find the best property investment locations or Australia’s best growth suburbs.


You know… that special location that will outperform the averages and the right property in that location will be the stepping stone to a substantial property empire.

But I’m afraid my response disappointed the journalist because I didn’t answer his questions.

Now I wasn’t surprised by the request – I have found that most property investors start their journey by trying to choose a top location (because they think that’s the best place to buy an investment property) or find a property that will make a great investment.

However, when you look at the results that most investors achieve by asking these types of questions, it makes little sense to think about property investment from this angle.

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Note: Statistics show that around 50% of all property investors sell up in the first five years, and of those that 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 looking for that ideal property.

Here’s how to do it instead.

Buying property as an investment

You see…property investing is a process, not an event.

Things have to be done in the right order – and selecting the property comes right at the end of the process.

The property you will eventually buy will be the result of a sequence of questions you will need to ask and answer and a series of decisions you’ll need to make before you even start looking at locations.

Long before we talk about a property or the right location with our clients at Metropole, we look at factors including their age, their timeframes, and the desired end results in other words, what do they really want the properties to do – are they looking for cash flow, capital growth, or a combination of both.

And that’s because what makes a great investment property for me, is not likely to be the same as what would suit your investment needs.

So it all starts with helping our clients formulate a Strategic Property Plan which takes into account their surplus cash flow position, their risk profile (for example would they consider undertaking renovations or small development), whether they currently own a home or are wanting to buy a new home or upgrade their existing home in the future, if they are going to earn more income in the future, or if they’re going to decrease their family income because they’re having a baby, how many other investment properties they own, where they are located and how they are performing plus 35 other considerations.

So my first recommendation to anyone asking where to invest is to sit with an independent property strategist to formulate their plan.

It’s just too difficult to do on your own and I’ve found most investors tend to be too emotionally involved to see their situation objectively.

The benefits of formulating such a plan include:

  • It will help you define your financial goals.
  • You’ll discover whether your goals are realistic, especially for your time frame.
  • You’ll find out what you’ve done right and what you’ve done wrong along your financial journey so far and what you can do about it.
  • You’ll be able to measure your progress towards your goals and whether your property portfolio is working for you, or if you’re working for it.
  • Your plan will help you identify risks you hadn’t thought of.

Your Strategic Property Plan should contain the following components:

  1. An asset accumulation strategy
  2. A manufacturing capital growth strategy
  3. A rental growth strategy
  4. An asset protection and tax minimisation strategy
  5. A finance strategy including long-term debt reduction and…
  6. 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 any more costly mistakes along the way.

Three important parts of your investment equation

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

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

And unless you have an unlimited budget, and that applies to very few of us, investors usually need to compromise on at least one of the above.

But the question some potential investors are asking, now that our markets have moved to the next stage of the property cycle is: “Is real estate still a good investment?”


We’re in for a 2-tier property market moving forward

Despite negative predictions, last year was an extraordinary year in the housing market – around 98% of locations around Australia recorded rising property values with many properties rising in value by more than 20%.

Before COVID-19, the ABS valued Australia’s residential property at $7.1 trillion. Today the ABS suggests the total valuation of Australia’s residential real estate is $10 trillion.

To put it another way, the growth in property wealth in the past two years is higher than all the gains over the decade before COVID-19 (2010-2019) combined.

But that was an extraordinary market – a once-a-generation property boom, and this year property markets are behaving differently.

They are more fragmented. In other words, not all property markets will continue growing strongly moving forward.

We have now entered the next phase of the property cycle, one where the market is cooling and prices are adjusting.

And while property prices will correct in some locations, there will not be a property “crash” as some commentators are predicting.

For house prices to “crash”, you need to have forced sellers and nobody there to buy their properties.

This only happens at time of high unemployment, but currently anybody who wants a job to help to get a job and with rising wages, it’s unlikely that we will see many distressed sellers forced to sell.

At this stage of the cycle high-end properties tend to fall in value first, and that’s currently happening.

And cheaper properties in the outer suburbs and some regional locations will also fall in value as wages growth in those areas has not kept up with the growth in the value of properties

However, properties located in the inner and middle-ring suburbs of our big capital cities, particularly in gentrifying locations, should hold their own. Property Agent Consult

While the outer suburban and more affordable end of the markets have performed strongly so far, affordability is now becoming an issue as the locals have had minimum little wage growth during the time when property prices have boomed.

In these locations, the residents don’t have more money in their pay packet to pay the higher prices the properties are now achieving.

More than that, Covid-19 has adversely affected low-income earners to a greater extent than middle and high-income earners who are likely to recover their income back to pre-pandemic levels more quickly, while many have not been hit at all.

A flight to quality

Now that the markets have entered a quieter phase and FOMO has disappeared, there is a flight to quality properties and an increased emphasis on liveability.

As their priorities change, some buyers will be willing to pay a little more for properties with “pandemic appeal” and a little more space and security, but it won’t be just the property itself that will need to meet these newly evolved needs – a “liveable” location will play a big part too.

To many, liveability will mean a combination of:

  1. Proximity – to things like parks, shops, amenities, and good schools
  2. Mobility – access to good public transport (even though this may be less important moving forward) or a good road system
  3. Access to jobs

What makes a worthwhile investment property?

This is very difficult to answer because it all depends upon you – what do you want out of your property investment?

It’s impossible to say this location is perfect for everyone.

If you have been following my blogs, podcast, or videos you’d know that I believe residential real estate is a high-growth, relatively low-yield investment and that’s why I would only be looking for locations that are likely to outperform the averages with regard to capital growth the long term.

But I do recognize that most investors need sufficient cash flow to service their debt, so yield is an important factor to be taken into account when choosing a location.

When selecting a location, I would initially start by eliminating locations.

For example, I would not be investing in regional Australia or in the smaller capital cities.

There’s no doubt that some better-performing regional locations or certain suburbs in our small capital city will outperform the poorer-performing suburbs of our three big capital cities.

Affordable Locations

But when I suggest you should only consider investing in Australia’s big three capital cities, I’m also saying that it’s important to be very selective in choosing suburbs in these cities – investment-grade suburbs that are likely to outperform.

Rather than looking in the rear vision mirror at what has already happened, I look for leading indicators of what’s likely to happen in the future.

So I look for locations where there is going to be strong economic growth which will lead to wage growth and eventually population growth.

But more than that I look for an affluent demographic who will be able to and prepared to, pay more to buy or rent in these suburbs.

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

Why fight with the gorilla?

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


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