Prices have eased at last, but picking property’s ideal investment bargain is no less elusive. JAMES THOMSON gleans the good oil from the experts for the top hotspots around the country.
By James Thomson
Prices have eased at last, but picking property’s ideal investment bargain is no less elusive. SmartCompany gleans the good oil from the experts for the top hotspots around the country.
House prices are softening, the number of listings is on the rise and auction clearance rates are plummeting – there’s no doubt we are in a buyers’ property market.
That’s great news for property investors who have been waiting patiently on the sidelines for the big price rises of the last few years to ease, but the task of finding the best places to buy has not got any easier.
There are plenty of cheap properties around, but buyers need to be careful they are actually getting a bargain. Pick the wrong suburb and you could have a costly dud on your hands.
To help property buyers sought the wheat from the chaff, we’ve asked some of Australia’s top property experts to name their hotspots in each state and territory – the suburbs and regions that will provide investors with strong returns over the medium to long term.
Terry Ryder is a property analyst and the founder of Hotspotting.com.au, a site dedicated to the art of helping property investors find the next big thing.
Cameron Kusher is a senior research analyst at property research firm RP Data.
Both are veteran property watchers and their analysis will help you scoop up a bargain in this buyers’ market.
New South Wales:
In NSW, it’s all about inner Sydney, where rental returns are averaging around the 6% mark and smart buyers can still find bargains. Terry Ryder nominates the suburb of Chippendale as his hotpot. “This inner-city Sydney suburb has been considered a tad downmarket, but is now being targeted by young adults because it’s next to Sydney Uni and walking distance to the CBD. The $1 billion re-development of the CUB site will raise the tone and the profile of this precinct.” Terraces cost around $650,000 and typical apartments sell for $375,000, which is very affordable for inner Sydney.
Cameron Kusher says gross rental yields in the suburbs of Haymarket, The Rocks, McMahons Point and Surry Hills will move close to averaging 7% over the next 12 months, with rental rates expected to rise about 10%. “This selection of suburbs provides a wide range of entry prices to the inner city unit market with median unit prices ranging from $400,000 at Surry Hills (average gross rental yield of 5.6%) to $680,000 at The Rocks (average gross rental yield of 8.4%).
Kusher is also enthusiastic about Melbourne’s inner city and believes there are some quality investment opportunities for units situated to the north of the Melbourne CBD. Areas such as Ascot Vale, Flemington, Carlton and Clifton Hill all have either train or tram transport and all have a current median unit price that is less than $350,000. Carlton currently has an average gross rental yield of 5.8%, and while the other areas haven’t yet achieved gross rental yields of above 5% there has been significant improvement during 2008.
Ryder is heading out of town for his hotspot, to the Latrobe Valley, which where 80% of Victoria’s electricity is produced. This is one of Australia’s employment growth regions and road links to Melbourne have been greatly improved by the Pakenham Bypass and the new EastLink tollway. “The key towns, Traralgon and Morwell, offer cheap houses (Morwell’s median is $130,000) and above-average returns,” he says.
Ryder says another hot regional area is Hervey Bay in Queensland, which is famous for its whale watching, nearby Fraser Island and its long-term population growth. “But its median house price has only just touched $300,000 and there’s more to come, with a number of big projects planned, including a re-development of the local harbour.”
Kusher says south east Queensland remains one of the safest locations to be investing money into the property market, as the region has the strongest rate of population growth in the country, accounting for just over 20% of the nation’s overall population growth.
“The key to good buying is selecting suburbs that are strategically located either within 10km of the Brisbane CBD or outer suburbs that are well serviced by transport options and retail facilities,” Kusher says.
One of the best investment options located in the outer fringes of the city is the Redcliffe Peninsula where median house prices are between $345,000 at Redcliffe (average gross rental yield of 4.2%) and $477,000 at Scarborough (average gross rental yield of 3.4%). Kusher says the duplication of the Houghton Highway Bridge will provide vastly improved access to the peninsula and improve commuting times into the Brisbane Airport and Brisbane CBD, while the Esplanade, which runs most of the length of the peninsula, is now a burgeoning cafe precinct and destination.
The West Australian property market has seen a significant slowdown over recent times after witnessing exceptional growth from 2004 to 2006 – at one point, Perth was actually more expensive than Sydney. Kusher says that outside of the booming mining areas and a couple of select sea change locations, value growth in Western Australia has been fairly minimal during the last 12 to 18 months.
The Bunbury area, situated 154 kilometres south of Perth and 87 kilometres north-east of Margaret River, is no different. But Kusher sees potential here. The Perth-to-Bunbury Highway is currently being upgraded and there are suggestions that the road could reduce travel times by as much as 30 minutes. The West Australian Government is also looking into the feasibility of providing a fast rail service between Bunbury and Perth, which could cut travel times by more than an hour.
“Whilst property value growth in the area has slowed significantly in recent times and some areas seem expensive, for those looking for a ‘sea change’ which is still within commuting distance to Perth, some areas offer exceptional value,” Kusher says.
He says the southern areas of the city such as Withers, College Grove and Carey Park all have median house prices that are less than $330,000 and while these suburbs do not have coastal frontage they are just minutes from the water and within six kilometres of the town centre.
We’ve all heard about the boom in prices in WA mining towns, but Terry Ryder says the town of Geraldton is still in reach for the average punter, with house prices in the $300,000s. “It also has the benefit of being not just a mining centre, but a regional city with a diverse economy, including tourism, fishing, agriculture and the export port,” he says. The big kicker is a new $2 billion port at nearby Oakajee.
Ryder’s SA hotspot is Ceduna, an isolated but prosperous regional centre in the west of South Australia. “It has an export port and a diverse economy based on aquaculture, agriculture and mining, but major new resources operations, particularly mineral sands mining, are set to take the town’s economy to a new level.” There is also a $100 million canal residential development happening. Houses currently are cheap; typically around $180,000.
Kusher points to the Le Fevre Peninsula in Adelaide, where most suburbs enjoy a current median house price which is below the current Adelaide median house value of $416,850. While median house values have jumped by 16.3% in Adelaide in the last year, most areas of the Le Fevre Peninsula have performed stronger due to the relative affordability and the high desirability of some of the suburbs, which are on the Gulf St Vincent and are located just 15 kilometres from the Adelaide CBD.
“The area has an abundance of character homes and the retail amenity within the area is improving,” Kusher says. The area is also serviced by a train which runs to the Adelaide CBD and there are a number of arterial roads within the peninsula linking it to other areas of Adelaide.
Ryder’s pick in our island state is the Cambridge precinct. He argues that Hobart’s retail facilities have been largely concentrated in the CBD, but this appears set for major change, with new retail warehouses opening and DFO-style projects in planning. Much of this action is happening in the Cambridge area east of central Hobart, out near the international airport.
“Suburbs surrounding this new retail precinct stand to benefit – there will be jobs as well as new retail options close by,” he says. Suburbs nearby include Cambridge, Seven Mile Beach, Mornington and Warrane. Prices are typically less than $250,000.
Australian Capital Territory:
Kusher says that Canberra inner city units have some of the best investment fundamentals in the country at the moment, with gross rental yields for units sitting at 5.85%, well above the 5.5% benchmark that investors often look for.
His analysis has found that the best performing suburbs in terms of gross rental yields, are those situated within close proximity to the city and/or Parliament House, including Forrest, Braddon, Campbell, Griffith and Reid. “These results suggest that the strong rental demand is largely being fuelled by the public sector, which is and always has been the backbone of the Canberra economy,” he says.
While the median prices in these areas are above the current Canberra median unit value of $352,226, investment fundamentals are likely to continue to improve due to a growing public sector and ongoing strong demand for rental units within inner city locations.
Terry Ryder’s pick is the inner-city suburb of Acton, which is located beside Lake Burley Griffin and dominated by Australian National University. “There’s a real trend of Canberrians looking for large comfortable apartments close to the centre,” Ryder says. Acton became an emerging hotspot with the announcement of the new Acton Tower, which attracted 2500 expressions of interest. Apartments and penthouses have sold off-the-plan at prices from $2 million to $4.5 million.
Kusher says Darwin houses are currently presenting the nation’s best capital city gross rental yield for houses at 6.18%. Houses within Darwin are the second most affordable of all mainland capital cities, with a median house value of just $435,641, and during the year to date house values within Darwin have seen the greatest percentage value increase of any mainland capital city.
“The strong rental return is being fuelled by strong demand from the military as well as strong demand from the resources sector, both of which appear to be likely to continue,” he says. Those houses situated closer to Darwin or on the oceanfront are likely to experience greatest demand and have the best prospects for capital growth.
Terry Ryder is going up-market for his NT hostpot. The Larrakeyah precinct, which consists of the suburb of Larrakeyah, the Cullen Bay marina area and Myilly Point, is the prestige end of the Northern Territory market, being on the water, beside the marina and on the doorstep of the city and the Garden Park Golf Course. “You pay over $1 million for the typical house in Larrakeyah and the median price for apartments is $450,000.” About $1.5 million buys 400 square metres to 600 square metres of residential land in the Cullen Bay marina estate.
Read more on investment property