Melbourne edges out Sydney on property returns

Sydney may be a clear winner in property prices, but when it comes to real estate investment, Melbourne has the edge.

Melbourne's eastern suburbs, which includes Glen Waverley, Dandenong, Blackburn and Box Hill, average 13.9 per cent total return annually since 2002, says an analysis by Investment firm Portfolio Management Services (PMS).

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The rental yield was 6.1 per cent, the data shows.

Melbourne's northern and south-eastern suburbs came in next with 12 per cent annual returns, followed by the inner-city at 11.1 per cent.

The audit was carried out by Atchison Consultants on 562 residential properties managed by PMS.

In comparison, Sydney's best-performing suburbs were in the north (including St Leonards, Ryde, Epping, Hunters Hill, Lane Cove and Macquarie Park), where annual returns averaged 10.9 per cent. The rental yield here was 4 per cent.

The inner-west came in a close second with 10.8 per cent followed by the eastern suburbs at 10.4 per cent.

Sydney's inner-west, however, led in rental yields with 6.4 per cent.

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All the suburbs for both cities averaged total return of 10 per cent per annum.

The results highlight the long-term rewards of buying property.

Fairfax Media noted Melbourne's top-ranked eastern suburbs include growth areas like Box Hill, which has benefited from an influx of Chinese migrants, as well as from investment in transport infrastructure and hospital and education facilities.