Booming towns a pitfall for investors
Median house-price growth may not be a realistic gauge of where to buy, writes Property editor Michelle Hele
THE longer you hold on to a property the more it should increase in value.
If markets act normally, selling after five years will generally mean you can sell for more than you bought in at, with a few exceptions to the rule.
Natural disasters can often leave local property markets reeling long after the debris is cleaned away with that effect often touching values of unaffected properties as well.
And according to RP data figures, anyone who bought around 2010 probably has a house that if they sold now they may not achieve what they paid for it a couple of years ago.
While suburbs in mining towns feature prominently on lists of those achieving the strongest growth in median house prices over five or 10 years, they are markets that depend on one industry continuing to maintain current price and growth levels.
Wandoan has had the highest level of median house-price growth during the past five years.
Its median has jumped by 210.8 per cent, but that’s not going to necessarily make sellers millionaires any time soon. The significant increase comes off a very low base with the median house price now still only $322,500.
Mining towns also dominate in terms of 10-year median growth figures, but once again the base levels are low.
In the Brisbane statistical region it is the outlying suburbs which have recorded the best percentage growth during the last five and 10 years.
RP Data figures reveal Richlands has had the best growth for five years and 10 years.
Nudgee, Ocean View, Corinda and Lutwyche all appear in the top five with medians up over five years between 44 per cent and 50 per cent.
When looking at suburbs with much higher buy-in prices, the percentage growth of medians is much less significant.
Surfers Paradise has Queensland’s highest median house price at $1.31 million, but values have dropped 9.3 per cent during the past five years and grown only 7.8 per cent in 10 years.
In Brisbane, New Farm has the highest median of $1.145 million, with growth over five years of 34.7 per cent and 21.9 per cent over 10 years.
Propell Valuers CEO Bart Mead says potential investors need to look at more than just the percentage increase figures when trying to work out whether an investment is worthwhile.
He says some ‘‘good results’’ could be because there are low numbers of transactions or there are sales in the area which are development sites.
Mr Mead warns potential investors about buying in areas dominated by one economy and says even though places such as Wandoan are showing strong growth, buy-in prices are too high and the growth is only short term.
‘‘I would not recommend anyone look at investing in a place like that,’’ he says. ‘‘Probably 10 years ago you could buy a house for $30,000 to $50,000, now you are talking $300,000, it is not sustainable.’’
Mr Mead says when looking at investing rather than just checking out past performance alone, buyers should look for areas within about 7km to 8km of the CBD.
The four elements he says properties should have – rather than where they are – is being close to entertainment and coffee precincts, employment, education and transport.
‘‘They all seem to really drive the astute investor,’’ he says.
Mr Mead says from a growth point of view they don’t see double-digit growth as sustainable in the current market. ‘‘You need to look at what is realistic, does the property actually make sense? Is the return realistic and sustainable?’’
Queensland Wandoan Rubyvale Rocky Point Boyne Valley Barcaldine Hughenden Taroom Winton $322,500 $182,500 $435,000 $175,000 $207,500 $130,000 $235,000 $160,000 210.8% 160.7% 129.1% 127.3% 118.4% 116.7% 113.6% 110.5% Brisbane statistical division Richlands $480,000 53.8% Nudgee $479,500 49.8% Ocean View $610,000 47.9% Corinda $607,000 46.6% Lutwyche $650,000 44.4% Thagoona $389,000 44.1% Toorbul $352,500 43.9% Upper Mount Gravatt