This is a great time for investors to be active after a softening in prices in the last six months of 2010. This was off the back of 17 consecutive months of growth with capital city property prices up 18.5 per cent according to RP Data, so a slight softening is nothing to be concerned about. It’s the natural ebb and flow of the market and in this case, a direct result of interest rates returning to normal levels.

Of course, we all want to buy in the ‘ebb’ phase, and that time is now. Vendors will have to be more realistic on price and buyers will be negotiating hard in the first quarter of 2011. This doesn’t mean it’s a buyers’ market. I’ve always believed that a well-priced, well-presented and well-marketed property will generate a strong result. When vendors are realistic, their homes are much more appealing to buyers, generating stronger competition and a better result.

But back to investors. If you’re looking to invest this year, don’t expect to find a ‘bargain’ in our capital cities. The underlying fundamentals of a strong economy, population growth and low unemployment are keeping prices stable. I believe there’s a six-month window to go bargain shopping in regional towns but capital city markets are likely to stay level for a while now.

When buying for investment, you need to accept that a good quality property is not going to come cheap. And you always want to buy quality to reap better long term rewards. While I strongly advocate setting a budget, I also encourage you to be prepared to pay well for a property that’s worth it.

As always, location is a critical ingredient and buying within 10km of your capital city’s CBD is a very good rule of thumb for property investment. The number crunchers at RP Data recently released a report that will help investors identify good buying opportunities within this radius.

Let me lay it out for you. Based on statistics alone, here are the best buying suburbs and the best rental yielding suburbs in each capital.  Please note we’re not factoring in the character, industries or amenities of these suburbs, which you must take into account when considering a suburb for investment.  But these suburbs are ‘good on paper’, so they’re worth checking out.

Most affordable suburbs within 10km of CBD (according to RP Data study)

Sydney
  • Houses –Sydenham ($619,500), St Peters ($645,000), Turrella ($645,000)
  • Apartments –Eastlakes ($360,500), Potts Point ($363,792), Ultimo ($367,250)
Melbourne
  • Houses –Braybrook ($430,000), Tottenham ($465,750), Maidstone ($532,500)
  • Apartments –Carlton ($250,000), West Footscray ($300,000), Kingsville ($318,000)
Perth
  • Houses –Cloverdale ($420,000), Westminster ($440,000), Ashfield ($457,500)
  • Apartments –East Perth ($255,000), West Leederville ($285,000), Glendalough ($297,000)

Canberra

  • Houses –Crace ($379,253), Scullin ($437,500), Page ($452,000)
  • Apartments –Lyons ($277,500), Hughes ($312,000), Campbell ($330,000)
Adelaide
  • Houses –Wingfield ($258,500), Gilles Plains ($325,000), Athol Park ($346,750)
  • Apartments –Keswick ($219,000), Fitzroy ($227,500), Kilburn ($237,000)
Darwin
  • Houses –Moil ($495,000), Malak ($495,000), Jingili ($500,000)
  • Apartments –Wagaman ($303,500), Malak ($345,000), Coconut Grove ($390,000)
Hobart
  • Houses –Clarendon Vale ($169,000), Risdon Vale ($185,000), Rokeby ($215,000)
  • Apartments –Rosetta ($221,350), Glenorchy ($222,000), West Moonah ($232,500)

Highest gross yielding suburbs within 10km of CBD

Sydney
  • Houses –Killarney Heights (median price $995,000; gross yield 4.7 per cent), Woolloomooloo ($747,000; 4.7 per cent); Balgowlah Heights ($1.688 million; 4.6 per cent)
  • Apartments –Ultimo ($367,250; 6.8 per cent), Wolli Creek ($460,000; 5.8 per cent), Alexandria ($425,000; 5.8 per cent)
Melbourne
  • Houses –Fitzroy ($800,500; 3.6 per cent), Essendon West ($730,000; 3.5 per cent), Kingsville ($590,000; 3.5 per cent)
  • Apartments –Carlton ($250,000; 7.9 per cent), Melbourne ($411,000; 5.7 per cent), Southbank ($530,000; 5.2 per cent)
Perth
  • Houses –Redcliffe ($460,000; 4.4 per cent), Cloverdale ($420,000; 4.3 per cent), East Perth ($1.12 million; 4.1 per cent)
  • Apartments East Perth ($255,000; 6.1 per cent), Glendalough ($297,000; 5.7 per cent), West Leederville ($285,000; 5.5 per cent)
Canberra
  • Houses –Harrison ($559,000; 5.1 per cent), Chifley ($586,500; 5.1 per cent), Scullin ($437,500; five per cent)
  • Apartments –Canberra City ($450,000; 5.9 per cent), Reid ($405,000; 5.8 per cent), Braddon ($430,000; 5.6 per cent)
Adelaide
  • Houses –Athol Park ($346,750; 4.9 per cent), Gilles Plains ($325,000; 4.6 per cent), Thebarton ($404,000; 4.6 per cent)
  • Apartments –Keswick ($219,000; 5.8 per cent), Woodville North ($260,000; 5.6 per cent), Kilburn ($237,000; 5.5 per cent)
Darwin
  • Houses –Bayview ($837,500; 5.6 per cent); Wagaman ($537,000; 5.3 per cent), Malak ($495,000; 5.3 per cent)
  • Apartments –Stuart Park ($395,000; 5.9 per cent), Malak ($345,000, 5.7 per cent), Coconut Grove ($390,000; 5.4 per cent)
Hobart
  • Houses –Risdon Vale ($185,000; 7.3 per cent), Clarendon Vale ($169,000; 6.8 per cent), Rokeby ($215,000; 6.2 per cent)
  • Apartments –Hobart ($415,000; 6.9 per cent), Glenorchy ($222,000; 5.6 per cent); Rosetta ($221,350; 5.4 per cent)

N.B We’ve purposely omitted Brisbane due to the impact of the flood crisis.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.