Top 100 sub­urbs set to boom

Take heart, prop­erty in­vestors! While prices may have soared out of reach in some lo­ca­tions, there are still ex­cit­ing prospects in oth­ers – even in the same city. Us­ing a tried-and-tested strat­egy, our three ex­perts tip the win­ners for the years ahead.

Money Magazine Australia - - CONTENTS - JEREMY SHEP­PARD BEN KINGS­LEY BRYCE HOLDAWAY

If you lis­ten to or read any main­stream me­dia, you would think that prop­erty val­ues all around the coun­try are fall­ing. But that’s not the full story. The mar­ket is broad and di­verse, and as such is made up of hun­dreds, if not thou­sands, of sub-mar­kets, each sub­ject to a unique set of price in­flu­ences. Yet given the strong me­dia at­ten­tion on Syd­ney and Mel­bourne, it’s easy to for­get this. In fact, right now across Australia there are mar­kets that are boom­ing while, yes, there are oth­ers in de­cline. The true chal­lenge or skill is know­ing which one to buy in right now.

You’d have to have been liv­ing un­der a rock to not know about the re­cent boom in Syd­ney. From 2012 to 2017, most Syd­ney prop­er­ties piled on about an ex­tra 70% in value. That’s roughly $500,000. It’s fair to say that dur­ing that boom many Syd­neysiders earned more from eq­uity growth than they earned from work­ing 9 to 5. But over roughly the same time Perth and Dar­win were in price de­cline.

HO­BART TAKES OVER

Syd­ney’s growth stopped at the end of 2017, although to high­light our point about sub-mar­kets within mar­kets, it didn’t hap­pen every­where. In fact, the me­dian house price in the Waver­ley lo­cal gov­ern­ment area to the east of Syd­ney’s CBD has grown by more than 10% in the first half of 2018. This area stretches from Dover Heights in the north to Queens Park and Bronte in the south.

While Syd­ney prices may have peaked gen­er­ally and Perth prices look to have bot­tomed, the prices in the west haven’t changed sig­nif­i­cantly so far in 2018.

Ho­bart, on the other hand, has re­cently rushed to the top of the growth charts. It was al­most the per­fect ba­ton change, with Ho­bart start­ing just as Syd­ney was stop­ping. After a long pe­riod of stag­nant val­ues, Ho­bart had high dou­ble-digit growth in 2017 and this has con­tin­ued well into 2018. And there is still a chronic un­der-sup­ply of prop­erty that looks some way from be­ing re­solved.

EX­TRA­OR­DI­NARY OP­POR­TU­NI­TIES

All this time Ade­laide and Bris­bane have been rel­a­tively flat. Yet the cur­rent data sug­gests both th­ese cities have a few good ducks lined up for some growth in the next cou­ple of years.

Can­berra has been a con­sis­tent and solid gainer – no rapid growth as with Syd­ney, Mel­bourne and Ho­bart but not medi­ocre like Ade­laide and Bris­bane.

By the very na­ture of dif­fer­ent mar­kets op­er­at­ing to dif­fer­ent cy­cles, you get a greater ap­pre­ci­a­tion of each cap­i­tal city mar­ket beat­ing to its own eco­nomic con­di­tions, largely in­de­pen­dent of the broader na­tional mar­ket. And this isn’t re­stricted to just state cap­i­tals; there are about 100 sig­nif­i­cant ur­ban ar­eas around Australia that have unique economies. (See ta­ble, next page)

Not only is there a wide de­gree of eco­nomic in­de­pen­dence among sig­nif­i­cant ur­ban ar­eas but within each area – as with Waver­ley in Syd­ney – there are in­di­vid­ual sub­urbs and clus­ters of sub­urbs with unique sup­ply and de­mand char­ac­ter­is­tics. Fur­ther­more – and this is what makes pick­ing a win­ning lo­ca­tion that lit­tle bit harder – it’s also pos­si­ble that at any point in time one sub­urb could have quite dif­fer­ent cap­i­tal growth prospects from those of a nearby sub­urb in the same area.

And the dif­fer­ences don’t just end at the sub­urb level. Within the same sub­urb, house prices could be grow­ing strongly while units are static.

All this means that there are thou­sands of prop­erty mar­kets, many of which are in dif­fer­ent price cy­cles from the na­tional cy­cle. And that’s the truly ex­cit­ing bit. As we lift our eyes to­wards val­ues in 2020, there are po­ten­tially dozens of ex­tra­or­di­nary growth op­por­tu­ni­ties in many ar­eas across the coun­try, even if the broader mar­ket ap­pears to be in de­cline.

SUP­PLY AND DE­MAND

So how do in­vestors un­earth th­ese gems? The price for any ser­vice or good is de­ter­mined by the law of sup­ply and de­mand. Real es­tate is no dif­fer­ent. If de­mand for prop­erty out­weighs sup­ply, then the price will in­crease. Con­versely, if sup­ply ex­ceeds de­mand, prices will fall.

Jeremy, Ben and Bryce are the co-cre­ators of Lo­ca­tionS­core.com.au, which was born out of their pas­sion for ed­u­cat­ing DIY prop­erty in­vestors to make smarter de­ci­sions. Each is a re­spected ex­pert in his own right yet they reg­u­larly col­lab­o­rate on other projects, such as the Prop­erty Couch pod­cast and Em­power Wealth Ad­vi­sory, as a spe­cial­ist ad­vi­sory prac­tice.

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