Research reveals best suburbs to buy in if Labor cuts negative gearing
Property investors hoping to capitalise on negative gearing tax concessions before they are potentially cut next year should consider purchasing established houses in pricier, inner ring suburbs, new research suggests.
The analysis showed investors would have the best capital growth prospects in 34 key capital city markets where prices tended to be high and rental returns were low.
Prices in these areas were forecast to growth by an average of 5 per cent or more, substantially higher than the national average.
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The suburb with the highest annual growth forecast in the country was Parkside in Adelaide, where house prices were predicted to increase by 7.8 per cent next year.
Top Sydney suburbs included Drummoyne, North Narrabeen, Marrickville and Leichhardt, according to the sellorhold.com.au data.
Sydney’s biggest growth was forecast for Woronora in the Sutherland Shire region at 6.3 per cent.
The sellorhold.com.au research was based on a number of measures used to determine the level of demand and supply, with areas where there was little supply but high demand offering better capital growth.
The data also considered growth cycles in each suburb and whether prices had recently been increasing or decreasing.
Researcher Jeremy Sheppard said some of the best suburbs for investors often had lower rental yields but would offer better investment prospects because of the strong capital growth potential.
“Investors should buy properties because of their capital growth potential over the long-term, not because they can claim negative gearing benefits for a temporary period of time,” Mr Sheppard said.
The Labor Party has promised to restrict negative gearing to new properties from January 1 if elected.
“Negative gearing currently offers a legal taxation deduction for anyone who invests in income-producing assets, including established property,” Mr Sheppard said.
“However, those investors quickly start paying tax when their property becomes positively geared after only a few years – something that Labor seems to not want to talk about.”
In Adelaide, strong growth potential in the suburb of Parkside was due to its location.
“Parkside is only a few kilometres south of the Adelaide CBD, plus it borders the southern park lands, so it might be the reason why houses in that suburb are in strong demand from buyers,” Mr Sheppard said.
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Belmont in Brisbane, located about 12km from the city centre, had the second highest forecast annual growth of 7.6 per cent.
Two other Brisbane suburbs also showed forecast annual capital growth of more than 7 per cent – Mansfield and Stafford Heights.
Mr Sheppard said Mansfield State High School was always in demand from parents wanting their children to attend the well-regarded public school, which might underpin that suburb’s property price performance.
“Stafford Heights, located about 8km north of Brisbane, has also been a suburb in demand for a while now partly due to gentrification as well as many homeowners renovating its many post-war properties,” he said.
And while prices in Sydney and Melbourne may have been softening over the past two years, Mr Sheppard said the analysis showed plenty of suburbs where buyers were keen to purchase.
Woronora was a standout due to its popular location, he said.
“Woronora might be some 27km from the Sydney CBD, but it is also located on both sides of the picturesque Woronora River, which is why so many people want to live there,” Mr Sheppard said.
The Sydney and Melbourne suburbs identified mostly had high median house prices, but this was a reflection of the desirability of those locations.
Melbourne’s notable suburbs for capital growth potential were Caulfield North, St Kilda East, Ivanhoe and Flemington.
TOP SUBURBS FOR GROWTH
SYDNEY: Woronora, Leichhardt, Drummoyne, North Narrabeen, Marrickville
MELBOURNE: Caulfield North, St Kilda East, Ivanhoe, Flemington, Maribyrnong
BRISBANE: Belmont, Wilston, Mansfield, Stafford Heights, Stafford
ADELAIDE: Parkside, Highgate, Beulah Park, Findon, Rosslyn Park
PERTH: Mount Hawthorn, Willetton, Doubleview, Floreat, Wembley