Where property investment pays off in Sydney

Buying property is widely regarded as one of the safest investments over time. With sustained high interest rates and the Reserve Bank's recent decision to raise cash rate, house prices have stagnated or slumped in many places. CBRE, a real estate giant, suggests there are no suburbs in Australia where buying a unit is cheaper than renting one.

Yet a recent realestate.com.au article claims 48 Sydney suburbs buck this trend. The analysis compared monthly mortgage repayments with rent, concluding that in some inner-city precincts, ownership costs less than renting by more than $100 per month — even before accounting for tax benefits.

Living in your own home carries sentimental value. But the true costs of property ownership are rarely calculated in full. They are varied, opaque, and difficult to compare with alternative investments like equities or bonds. For investors seeking returns rather than sentiment, proper accounting is essential.

The full ledger

Property ownership involves far more than mortgage repayments. Upfront costs include stamp duty, mortgage application, valuation fees, legal costs and title registration. For a median Sydney one-bedroom apartment at $729,000, these can amount to $29,200, or 4% of the purchase price.

Ongoing costs accumulate: mortgage interest, council rates, insurance, strata fees, maintenance, and agent commissions during tenancy changes (typically 1% of the property value). Then there are closing costs when you eventually sell—usually 2% of the sale price in agent fees and marketing.

Most analyses stop there. But one of the biggest cost is often invisible: opportunity cost. Money tied up in property deposits and ongoing expenses cannot be invested elsewhere. Over a median four-year holding period for a 1-bedroom unit, the same funds invested in the ASX 200 at an average annual growth rate of 6.07% would have returned $38,809.

To measure returns properly, this analysis uses compound annual growth rate (CAGR), which accounts for gains or losses over time. Property returns combine capital appreciation and rental yield, minus all ownership costs. This can then be compared directly with historical equity returns.

Rental income provides the clearest test of whether a property pays its way. The median rent for a Sydney one-bedroom unit is $687 per week, rising at 2.57% annually. Subtracting vacancy periods (typically four weeks per year), rental income totals $137,077 over four years.

With capital gains at 2.89% annually, landlords remain slightly in deficit—around $7,000—by year four when the property is typically sold. Break-even occurs in year five, when cumulative returns outpace costs by nearly $1,000. By year ten, assuming the unit is sold, the balance reaches $40,000 before tax benefits, with closing costs included.

Australia's tax system favours property investors through negative gearing and the capital gains discount. Losses from rental properties offset other income, reducing your tax bill. These benefits increase with your marginal tax rate, the rate is especially higher in the early years of ownership when the losses are most significant.

The magic formula

Capital growth and rental growth are the two largest contributors to net gain. When suburbs are plotted by growth rates against ten-year net gains, capital growth shows a stronger positive correlation across different unit sizes than rental yields.

The winners tend to be suburbs with median annual capital growth above 2.5%. Geographically, Eastern suburbs show higher net gains owing to substantial price appreciation, despite considerably higher median prices. Western suburbs such as Bankstown and Guildford offer lower initial investments and higher rental yields. Inner-West suburbs like Marrickville and Dulwich Hill also deliver good returns, though with higher entry costs due to steeper house prices.

The verdict

Property investment in Sydney is not universally profitable. It works in specific locations under specific conditions and requires holding for longer terms.

For most investors, the question is not whether buying beats renting, but whether it beats other investments. This analysis shows that whilst opportunities for returns exist in Sydney suburbs, identifying them requires thorough research. mokki.app provides just the tools to do so.

Methodology

This analysis compiled property data for 35,142 rental and 45,426 sold listings across roughly 650 Greater Sydney suburbs between February 2025 and January 2026. The starting point was price changes between current and previous rents and sale prices. Median rent and property prices were calculated for each suburb to estimate rental income and capital gains.

Ownership costs assumed a 20% deposit, a 30-year fixed-rate mortgage at 5.78%, and opportunity cost based on ASX 200's average annual growth of 6.07% over the past decade. Net gain or loss was calculated as a percentage of median property value at suburb level. Suburbs with fewer than ten records were excluded.