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.

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.