By Rich Harvey, CEO & Founder, propertybuyer.com.au
We’re in tumultuous times in terms of investment and finance. Uncertainty reigns, driven in large part by unstable international trade relations and the political landscape. On the upside, however, property has historically proved a stalwart of stability. Those who buy well and hold for the long term tend to enjoy impressive returns and reasonably low risk over time.
Of course, the key to great asset selection is balancing capital growth against rental return. Normally there’s a trade-off between the two. You must own find an investment that not only has excellent potential to increase in value but also delivers adequate yield to cover (or even exceed) your holding costs. Cash flow generated by solid rental returns is what keeps many portfolios afloat, particularly during periods of interest rate volatility.
With this in mind, I wanted to discuss one of Australia’s most promising regions for investment – Newcastle. The transformation of Newcastle’s CBD from an industrial port city into a vibrant, cosmopolitan centre with exceptional lifestyle appeal has been remarkable. This evolution has created a rental market with exceedingly low vacancy rates and consistent tenant demand.
I was keen to explore suburbs where buyers enjoy not only solid rental returns but also the prospect of strong rental growth, along with excellent capital gains potential. To that end, it only made sense to have a discussion with Propertybuyer’s Newcastle expert, Kevin Mason. His local experience helped uncover some gem locations worthy of further investigation by investors.
Detached housing
For those with a house-buying budget range between $960,000 and $1.25 million, Kevin chose five standout suburbs that deliver a great fundamentals to investors.
Kotara has seen impressive house price growth, backed by a minuscule vacancy rate of just 0.4%. This family-friendly suburb positioned nine kilometres from the CBD combines excellent amenities with ready access to employment hubs, making it a consistent performer for landlords. REA data shows the median house price in Kotara is $955,000, and median rent is $700 per week.
Adamstown boasts a vacancy rate of only 0.3% – clear evidence of its popularity among tenants. The area has both period homes and newer builds, providing varied opportunities for investors to secure solid-yielding assets. Adamstown has a median house price of $1.014 million, and median rent of $675 per week.
New Lambton features the lowest vacancy rate on our list at a remarkable 0.1%. That sort of demand can only result in strong rent growth for property owners. The suburb's tree-lined streets, quality schools, and village-like atmosphere make it highly sought-after by professional tenants and families alike. The median house price in New Lambton is $1.13 million, while median rent sits at $717 per week.
Mayfield continues its impressive gentrification journey. This once-working-class address is now a drawcard for young professionals and families seeking character homes. The suburb's 0.9% vacancy rate demonstrates the strong tenant demand in this evolving location, and its potential for value gains. Mayfield houses have a median price of $903,000, and a median rent of $655 per week.
Waratah rounds out the house recommendations. This address, six kilometres from the CBD, offers a slightly more accessible price point while still delivering excellent rental returns and strong long-term growth prospects. The median price of housing here is $900,000 which is well within reach for most house-buying investors, while median rent sits at $650 per week currently.
Kevin said that across these suburbs, consistent house price growth of between six and seven per cent per annum over the past decade adds an attractive capital gains component to the equation.
Unit investment
For investors with budgets between $650,000 and $900,000, Kevin recommends focusing on these five unit markets:
The Newcastle CBD has undergone an extraordinary transformation over the past decade. With the East End development helping define the city’s current phase of urban renewal, apartments here show tremendous promise for rental and capital growth. The current vacancy rate sits at just 1%, while the median unit price is $861,000 and median rent is $680 per week.
Merewether delivers exceptional beachside lifestyle appeal that tenants are willing to pay a premium for. There’s also plenty of parkland to enjoy with part of the Glenrock State Conservation Area within the suburb’s boundaries as well. Its 0.6% vacancy rate highlights the strong demand in this desirable coastal location, while the median unit price of $795,000 means most buying budgets can be catered for. Median rent is currently $580 per week.
Cooks Hill is an inner-city address that’s often referred to as the "Paddington of Newcastle". It offers trendy inner-city living with lively cafés, boutique shopping, and a palpable community vibe. Its vacancy rate sits at around 1%, reflecting its popularity among renters seeking an urban lifestyle. Cooks Hill’s unit median is just $800,000 with current rent median of $610 per week.
The Junction provides excellent amenities, good transport connections, and proximity to both beaches and the CBD, making it highly attractive to tenants. While units are available in this market, the volume of sales has been limited, so reliable statistics on medians are a little more difficult to source. That said, Kevin believes the right type of attached housing asset has excellent upside potential.
Hamilton is another near-city suburb being just four kilometres from the CBD. It has an extremely low 0.3% vacancy rate. The suburb's vibrant dining precinct and excellent transport links make it a perennial favourite among renters. The unit median in Hamilton is $625,000, while the rental median is $520 per week.
Kevin highlighted that unit markets in these areas have been achieving impressive growth of five to six per cent per annum over the past decade. Interestingly, the gap between house and unit growth rates has narrowed significantly as more buyers seek lower-maintenance options in lifestyle-rich locations. The appeal of these unit areas to first time buyers is also notable, which will help drive price growth into the future as well.
A dual-income strategy
One of the most compelling strategies for maximising yields in Newcastle is to seek out dual-income real estate investments. Kevin said he’d recently identified an off-market property comprising a renovated three-bedroom house wth an attached one-bedroom granny flat. With the main house generating $650 per week and the granny flat bringing in $350 per week, the combined weekly income of $1000 represented an excellent yield of 4.95% on the likely $1.05 million purchase price.
This approach also creates what Kevin describes as a "recession-proof" investment. Even during economic downturns, smaller, more affordable rentals tend to maintain occupancy as tenants downsize from larger, more expensive properties. Dual income, or multiple residential holdings also have less overall vacancy risk during slower rental markets too, because having all the lettable spaces empty at once is extremely rare.
Kevin shared his own experience with this dual-income strategy. Two and a half years ago, he purchased a "diamond in the rough" for $970,000 in a suburb where the median house price was around $1.05 million. After a cosmetic renovation involving repainting, new carpets, and various repairs, he secured $700 per week for the main house and $550 per week for the separate two-bedroom granny flat – a combined income of $1250 weekly. The property has already appreciated to approximately $1,185,000 and delivering a yield of 5.5%.
Seek quality over yield
While the yield numbers are compelling, it's worth remembering that not all high-rental-return properties make good investments. The right asset in the right location will always outperform a mediocre property with a marginally higher initial return. You must be seeking capital growth potential to shore up your investment portfolio for long-term gains.
So, look for assets in areas with proven growth records, low vacancy rates, and lifestyle appeal that will attract quality tenants year after year.
This is where the expertise of a specialist, local buyer's agent is invaluable. By leveraging market knowledge and extensive networks, they identify properties with not just strong current yields, but also excellent long-term growth potential and value-add opportunities that might not be immediately obvious to other buyers.
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