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It’s not easy to predict property hotspots, but new research may help give you an idea of where renters are looking and what suburbs are expected to surge.

It’s the million dollar question that every investor wants to know the answer to. It’s not easy to predict property hotspots as the answer is not always black and white.

But new research may help give you an idea of where renters are looking and what suburbs are expected to surge.

According to realestate.com.au, the demand for apartment living is growing, as the number of renters looking for a new or existing rental apartment has risen to 39%. Realestate.com.au has also collated the top 10 searches for apartment rentals over the past six months and they are (from first to 10th) Brisbane, Canberra, Perth, Melbourne, Docklands (VIC), Southbank (VIC), Braddon (ACT), Nathan (QLD), Parramatta (NSW), Chatswood (NSW).

There are several contributing factors that affect how much rental income investors receive and these include interest rates, rental yields and population growth. The RBA cash rate has remained steady at 2.5% since August 2013 and experts are predicting that it will stay low for at least the next few months. This low interest rate could mean that investors are receiving a higher rental return.

Capital cities around Australia have been experiencing mixed results when it comes to rental yields. According to Australian Property Monitors, as of December 2013, the capital city average for units 5.27%. The top three cities for unit rental yields are Darwin (5.82%), Hobart (5.53%) and Brisbane (5.40%).

It is important to include population growth in your research because if the area you are looking in is not growing, demand for rental properties may start to fall. According to the Australian Bureau of Statistics, population growth has varied throughout the different states with Western Australia at 3.1%, Victoria at 2.0%, Queensland and Northern Territory at 1.8%, Australian Capital Territory at 1.6%, New South Wales at 1.5%, South Australia at 0.9% and Tasmania with 0.2%.

With a large search number, strong rental yield and population growth, it looks like Brisbane may be a good option for investors in 2014. However, according to Residex, these suburbs are expected to experience significant growth within the next five years.

Units

City

Suburb

Median Value

Capital growth, last year

Rental yield, last year

Predictions, 5 years % p.a.

Melbourne

Elwood

$532,000

6.12%

4.13%

8%+

Melbourne

St Kilda

$465,500

6.18%

4.51%

7%+

Melbourne

Richmond

$507,000

6.41%

4.63%

7%+

So, if you are not ready to purchase an investment property in the next few months, it would be beneficial to look at where the property market is heading. But remember, information and tips on property hotspots provided by industry experts are usually generalised and do not take your own goals and financial situation into account. So it is important that you also do your own research to ensure you find the right property in the right area for you.

Many industry experts are predicting that interest rates will remain steady for most of 2014, so it’s a great time as an investor to consider expanding your portfolio or reaping the rewards of a strong rental return on your existing investment.