Brisbane on the boil
The city tops a survey that lists suburbs most attractive to investors, property editor Turi Condon reports
IF you bought a house in Brisbane as an investment in the past year, then you probably made the right choice. Thirty- eight suburbs in the Brisbane region saw house prices grow by more than 10 per cent and those suburbs showed a reasonable rental return to boot.
In the Sydney region, only three suburbs made the grade.
With more investors returning to the market, The Australian asked RP Data to look at which suburbs around the country were pulling ahead.
The researcher used two measures: prices had to grow by more than 10 per cent, plus the suburb needed a rental return above 4.5 per cent in the year to May ( see suburb tables on Page 2).
What the research shows is a still patchy housing market, but one starting to recover with good longer- term investment opportunities emerging.
In general terms, Brisbane is the pick of the capital cities, and houses in any city will continue to be a better investment than apartments, despite a recent kick in unit prices, says RP Data CEO Graham Mirabito.
Economic forecaster BIS Shrapnel also picks Brisbane as likely to be the best performing capital housing market in coming years, while Macquarie Bank favours Melbourne.
Despite a housing market labouring under affordability issues after last year’s three interest rates rises, there were some stellar performances from a handful of individual suburbs.
In resources- driven Darwin, the northern suburb of Rapid Creek saw house prices surge 38.5 per cent to $ 485,000 in the year to May, with about half the city’s 48 suburbs bettering 10 per cent price growth and returns above 4.5 per cent.
Adelaide performed, well with 32 of the region’s 435 suburbs ( or 7.4 per cent) beating RP Data’s bench mark for houses, and 28 suburbs ( 6.4 per cent) for flats.
In Brisbane, the city’s units also scored well, with 20 ( 5.3 per cent) of the region’s 378 suburbs having apartments above the benchmark.
In Perth, the housing bubble has burst, but not before the eastern suburb of Boya recorded 39 per cent price growth for the year, taking the median price to $ 490,000. But in Perth the surging prices of last year meant rents could not keep pace, and rental returns for investors fell.
The result was that Boya was the only suburb in Perth where houses pulled ahead of the RP Data benchmarks.
For units, again only one Perth suburb made the grade — West Perth, where apartment prices rose 30.5 per cent for the year to a median of $ 261,000 and the rental yield was 4.84 per cent.
Sydney’s performance was woeful, affordability continuing to bite.
Only three out of the Sydney region’s 796
with suburbs beat the RP Data benchmark. For units, four suburbs made the grade — Berala, Brookvale, Centennial Park and Waitara.
In Melbourne, RP Data says the city is starting to show some reasonable growth, but it is yet to gain enough momentum to provide strong investment statistics.
Only four out of the 464 suburbs in the Melbourne region bettered the benchmark for houses and the same number for units.
Look around the country and the inner- ring suburbs are where the action is, says Macquarie Bank head of property research Rod Cornish.
At the other end of the spectrum Australia’s outer suburban housing markets are stagnating at best and at worst are beset by families’ financial stress and forced sales.
Cornish argues there will be a top- down recovery typical at this stage of the property cycle.
‘‘ Don’t forget its a stabilisation phase, not a strong upturn phase,’’ Cornish says.
‘‘ What will do best is the inner- ring suburbs and some middle- ring suburbs where there is some scarcity of product, ’’ Cornish says of Brisbane, Melbourne and Sydney. In the outer suburbs, it will be a couple of years before there is any improvement.
Employment prospects in harder- hit areas is starting to improve, but it takes time for wages to grow and rebalance affordability, Cornish says.
In Perth, despite a slowing market, some individual projects are faring well.
‘‘ Earlier this year, one riverfront Perth apartment development sold out in two weeks,’’ Cornish says.
But he cautions that that is not the norm in the deflating Perth market.
Any recovery will take longer than expected a year ago owing to 2006’ s three interest rate rises.
And the speed of the recovery will depend on the next round of rate rises, with Macquarie expecting one or two 25 basis- point rises in the first half of 2008.
‘‘ But the further we go into the stabilisation phase, the less the impact of a rates rise, compared to right now while the market is still fragile,’’ Cornish says.