Is Newcastle A Good Place To Invest In Property?

Buying an investment property is a huge, multi-layered decision. From saving the deposit to applying for and receiving finance approval, the time and effort required to become purchase-ready is a mammoth task. And you haven’t even begun to search for properties yet! 

This article outlines all the finer details of what our local experts consider when advising our clients on whether Newcastle is a good place to invest in property.

City Living With Coastal Lifestyle

Newcastle is truly blessed. We find ourselves less than two hours north of Australia’s most prosperous city, host to an incredibly diverse economy and have beaches that some would argue are among Australia’s best. This has attracted thousands of investors & owner-occupiers to the region from Sydney & other parts of the country over the years, a trend that shows no sign of stopping. Many of our clients want to relocate their families to Newcastle from Sydney for a quieter, more affordable lifestyle or invest their city incomes into a robust market for the future generation.

Affordable Price Points

Depending on your budget, Newcastle is host to various investment brackets. 

Investment Budget $600,000 - $800,000

This price point typically allows our clients to purchase 3-bedroom, family homes in select outer ring suburbs such as Wallsend, Edgeworth & Elermore Vale. Capital Growth in these locations has ranged from 6.8 - 7.0% per annum compounded over the last 10 years, and you can expect to find a rental return of around 4-4.2% per annum in the current market. 

Investment Budget $800,000 - $1,000,000

As we push up the price brackets, our recommendations naturally change. In recent years, we’ve noticed a distinct disparity between property values in the likes of Maryville & Carrington and their suburb neighbours of Mayfield, Waratah & Georgetown. Typically, you can purchase a 3-bedroom home with one or two bathrooms on a quiet street for less than $1,000,000 in these suburbs, and you can expect a rental return of around 3.8-4.0%. On the other hand, growth has been slightly more appealing in the last 10 years, with some suburbs growing between 7 – 7.2% per annum compounded.

Investment Budget $1,000,000 +

In Newcastle, purchasing an investment property for over $1,000,000 indicates that our client seeks a high-growth-style asset. If this were the case, focusing on a freestanding house would likely deliver the highest returns for the lowest risk. Investments in 3-bedroom homes on quiet, tree-lined streets of areas such as Tighes Hill, Hamilton & Adamstown will suit high-growth-focused investors; however, they will be taking a haircut on rental yield. Typical growth rates in these suburbs have ranged from 7.1-7.4% per annum compounded over the last 10 years, with rental yields in the vicinity of 3.5-3.8%.

Investing Under $600,000 In Newcastle

While not impossible, buying an investment property for under $600,000 in Newcastle may be more risky than it seems. Typically, at this budget, you will be restricted to very rundown freestanding homes in poor locations or forced into strata options. We typically recommend other more suitable locations in the Lower Hunter Valley to clients in this position and would be more than happy to share that advice with you.

Know The Local Risks

Buying property anywhere in Australia has its risks; however, there are a few specific to Newcastle that are worth knowing about:

Mine Subsidence

Back in the late 1800’s & early 1900’s, Newcastle was a treasure trove of natural resources for Australia & the world - In particular, coal. All this natural resource was found right next to the city, so it was common for mine shafts to be drilled through future & even existing suburbs. Fast forward 100 years, and while the mines have been filled & closed, there is still risk in some areas of the city. If you were planning to significantly alter the property or perhaps develop the land into something else, be mindful of the mine subsidence zone & restrictions of the property you’re looking to purchase.

Flood Zones

The next thing to consider when reviewing a property is whether or not it is susceptible to flood risk. In Newcastle, some suburbs are extremely risky, while others are devoid of risk altogether! In our minds, some areas are a blanket no-go for our clients, while others become golden opportunities. Check the local portals & review the likely insurance premiums before you commit to purchase.

Public Housing

Like every other city in Australia, Newcastle supports the community through its public housing initiatives. Unfortunately for homeowners & investors, owning property near densely populated public housing developments can have downsides. Before committing to a purchase, ensure you’re familiar with the local neighbourhood and make a judgment on whether you would live there. Remember, you need to tenant the property while you own it, so if you’re unwilling to live in that area, your prospective tenants will likely feel the same way.

Conclusion

Lake Macquarie presents a compelling opportunity for property investors with its blend of coastal charm, affordable price points, and potential for strong capital growth. However, understanding the local risks is crucial to making an informed investment decision. If you're considering investing in Lake Macquarie, our team of local experts is here to guide you through every step of the process, ensuring you make a wise and profitable investment.

Ready to explore investment opportunities in Newcastle?