The Melbourne suburbs offering both yields and capital gains

Investment decisions in property are often presented as choices between yield and capital gains. In Melbourne, there is a small selection of suburbs where both objectives can be met; they have above average capital gains and a yield higher than the citywide one.

As past performance is not a guarantee of future performance in the property market these are not suburbs investors should automatically buy into, rather it shows that with some astute property hunting strong investment outcomes may be found.

Over the past decade the compounding annual growth rate for a house in Melbourne was 5.77% and 5.16% for a unit. The gross rental yield over the last year for a house was 3.6% and 4.1% for a unit.

In the unit market there were 34 suburbs that recorded capital growth and with yields in excess of the citywide outcome, and five of those stood out. In the market for houses there were 33 suburbs.

The five standouts in the unit market, predominantly because of reasonable sales volumes providing opportunities for buyers, were Ferntree Gully, Brunswick West, Chelsea, Mount Martha and Boronia.

In the market for houses the five that stood out were Bayswater, Altona North, Boronia, Collingwood and Mooroolbark.

In it interesting to note that many suburbs in the outer eastern suburbs, around the base of Mount Dandenong, have recorded above average yields and capital gains over the past decade.

The other area of Melbourne that has multiple suburbs with good capital gains and yield is in the inner east.

Obviously the skill for an investor is not just finding the right suburb but the right property and that can take time and requires both research and a strong understanding of the local market.