Top 10 suburb picks for Australian investors
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They say a rising tide lifts all ships, as was the case throughout the 2022 property boom, but as the market turns there's going to be a lot of diversity when it comes to suburb performance.
While some markets will struggle, others still have an especially promising future. BuyersBuyers' latest Investor Special Report highlights suburbs showing the most potential around the country, so property enthusiasts take note.
We spoke to Pete Wargent, co-founder of buyer's agent network BuyersBuyers and one of the report's authors, to find out more about their top suburb picks and the future of Australian property.
Top 10: Investing in New South Wales
Sydney property prices are leading the current market downturn, and with interest rates tipped to continue rising as inflation surges, investors will need to be smart about their decisions.
Mr Wargent explained that "stamp duty reform kicks in in mid-January next year, so first home buyers won't have to pay stamp duty for properties up to $1.5 million.
It follows that that's going to be the best segment of the market to be in because there's going to be more there activity next year."
With Sydney prices being so high, that typically means that, for houses, NSW's major regional locations are going to be among the best bets for investors.
Top 10 locations to buy a house in NSW – with a budget of up to approximately $1m
Suburb Region Postcode Property type No. of properties Median price ($) Charlestown Newcastle 2290 House 4,362 $874,043 New Lambton Newcastle 2305 House 3,644 $1,072,312 Umina Beach Central Coast 2257 House 5,626 $1,170,769 Bateau Bay Central Coast 2261 House 4,153 $1,067,630 Woy Woy Central Coast 2256 House 3,216 $1,010,846 Ulladullla Shoalhaven 2539 House 2,786 $999,673 Moss Vale Southern Highlands 2577 House 3,260 $1,088,656 Mittagong Southern Highlands 2575 House 2,145 $1,080,602 Nelson Bay Hunter Valley 2486 House 2,486 $1,059,037 Albion Park Illawarra 2527 House 4,134 $921,756 With rental vacancy rates at historic lows, asking rents rising rapidly and sale prices dipping, Sydney units are also offering excellent opportunities for investors.
"Immigration has been fast-tracked now, and there's a massive skills shortage, so there will be a lot of people around," Mr Wargent said.
"There will be a lot of demand for rentals which will bring investors back in. Most of the picks are driven with that dynamic in mind.
"In terms of the locations, you're looking at a unit in the traditional low-supply blue chip areas like the Eastern Suburbs and Northern Beaches."
Top 10 suburbs for investors to buy established units in Sydney – with a budget of up to around $1m
Suburb Region Postcode Property type No. of properties Median price ($) Randwick Eastern Suburbs 2031 Unit 10,111 $1,204,902 Maroubra Eastern Suburbs 2035 Unit 6,525 $1,018,000 Narrabeen Northern Beaches 2101 Unit 2,664 $1,332,929 Freshwater Northern Beaches 2096 Unit 2,201 $1,290,867 Drummoyne Inner West 2047 Unit 3,912 $1,249,934 Dulwich Hill Inner West 2203 Unit 3,835 $859,275 Neutral Bay North Sydney 2089 Unit 4,958 $1,398,399 Mosman North Sydney 2088 Unit 8,063 $1,277,051 Surry Hills Inner South 2010 Unit 7,587 $985,685 Darlinghurst Inner South 2010 Unit 5,893 $1,172,404 The report notes that "the best opportunities in the unit market are set to be in the established housing market rather than for expensive new builds. Look for boutique apartment blocks with a high land value content and units with a point of scarcity, such as a view."
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Top 10: Investing in Victoria
Much like Sydney, the Melbourne market is beginning to wind back some of the monumental gains of the recent property boom.
The report explains that "prior to the pandemic, Melbourne had become a global city, and its population growth was the strongest in Australia due to strong immigration.
"This trend is likely to resume in 2023, and Melbourne is expected to be the largest capital city of Australia over the coming decade."
With that in mind, BuyersBuyers have picked out a variety of Melbourne suburbs expected to outperform, along with two selections from nearby Geelong.
Top 10 locations to buy a house in Victoria – with a budget of approximately $800k to $1.2m
Suburb Region Postcode Property type No. of properties Median price ($) Burwood East Inner East 3151 House 3,378 $1,303,234 Blackburn South Inner East 3130 House 2,288 $1,345,287 Cheltenham Inner South 3192 House 5,933 $1,334,079 Chelsea Inner South 3196 House 1,636 $1,247,282 Highton Geelong 3216 House 5,915 $1,024,287 Belmont Geelong 3216 House 4,824 $811,405 Glenroy North West 3046 House 5,109 $909,772 Keilor East North West 3033 House 4,553 $1,039,600 Reservoir North West 3073 House 12,556 $1,025,038 Preston North West 3072 House 9,164 $1,283,961 While houses in Victoria have outperformed units over the past decade, delivering excellent results for investors, the report notes that attached housing presents opportunities too.
"Family-suitable apartments in small unit blocks in popular areas, where houses are out of reach, have also delivered solid capital growth and a healthy rental return," it reads.
Top 10 suburbs for investors to buy established units in Melbourne – with a budget of $500k up to approximately $750k
Suburb Region Postcode Property type No. of properties Median price ($) Kew North East 3101 Unit 5,042 $848,098 Doncaster East North East 3109 Unit 4,199 $856,240 Camberwell North East 3124 Unit 3,428 $854,014 Carnegie South East 3163 Unit 6,393 $645,017 Caulfield North South East 3161 Unit 4,583 $715,943 Cheltenham South East 3192 Unit 4,498 $701,077 Pascoe Vale North West 3044 Unit 4,152 $661,352 Glenroy North West 3046 Unit 4,350 $580,354 Springvale Inner East 3171 Unit 3,212 $560,074 Glen Waverley Inner East 3150 Unit 4,325 $875,777 The report concludes that "units have underperformed houses significantly in Melbourne over the past decade, and there are some opportunities for contrarian investors to pick up a bargain."
Top 10: Investing in Queensland
"The Brisbane market has been red hot over the past couple of years, so you need to be a bit careful about where and what you buy," Mr Wargent cautioned.
With prices around south-east Queensland only just starting to dip, steering away from the highest peak prices in the most in-demand locations could be beneficial for investors.
"In terms of the selections generally we're looking at median priced or below types of properties," he said.
"If you're looking at places like the Sunshine Coast and Gold Coast, you're generally looking away from the blue-chip areas, because they've become phenomenally expensive. Look at the secondary markets out there, places like Tewantin and Buderim."
Top 10 locations to buy a house in Queensland –with a budget of $800k up to approximately $1m
Suburb Region Postcode Property type No. of properties Median price ($) Aspley Brisbane North 4034 House 3,999 $942,448 Wavell Heights Brisbane North 4012 House 3,660 $1,208,391 Brighton Brisbane North 4017 House 3,660 $875,220 Chapel Hill Brisbane West 4069 House 3,569 $1,247,925 Kenmore Brisbane West 4069 House 3,359 $1,066,637 Robina Gold Coast 4226 House 5,989 $1,137,119 Southport Gold Coast 4215 House 4,987 $859,936 Buderim Sunshine Coast 4556 House 8,978 $1,120,966 Tewantin Sunshine Coast 4565 House 3,853 $1,023,357 Maroochydore Sunshine Coast 4558 House 3,517 $963,249 While prices remain high for the state, an excessively tight rental market presents strong opportunities for both houses and units.
"Much of south-east Queensland is suffering from a chronic shortage of available rental stock as population growth has boomed," the report reads.
"There is little respite on the horizon, and we expect rental vacancies to remain extremely tight over the year ahead."
Top 10 suburbs for investors to buy established units in Queensland – with a budget of $500k up to a maximum of $750k
Suburb Region Postcode Property type No. of properties Median price ($) New Farm Inner Brisbane 4005 Unit 5,448 $737,786 Bulimba Inner Brisbane 4171 Unit 2,007 $697,020 Kedron Brisbane North 4031 Unit 1,753 $432,166 Carseldine Brisbane North 4034 Unit 1,035 $469,385 St Lucia Brisbane West 4067 Unit 3,203 $534,313 Indooroopilly Brisbane West 4068 Unit 3,018 $506,093 Taringa Brisbane West 4068 Unit 3,003 $473,354 Maroochydore Sunshine Coast 4558 Unit 7,019 $699,609 Mooloolaba Sunshine Coast 4557 Unit 4,369 $726,935 Buderim Sunshine Coast 4556 Unit 2,852 $586,337 With the Olympics coming to Brisbane in 2032, investors considering the long-term are wisely eyeing off the city as the market looks set to benefit many years beyond the Games.
Top 10: Investing in South Australia
"If you're looking at where investors have been most interested, Adelaide has been a real hotspot in recent months," Mr Wargent said.
Both Adelaide and regional South Australia have experienced a remarkable property boom, and it's the only state where strong growth is continuing.
"The rental market is an absolute quagmire at the moment, it's the lowest vacancy rate ever recorded for a capital city, 0.3 per cent.
"There are stories in the media about studio units renting for $400 a week. If rents are going to spike, that's generally going to bring investors into that market as an inflation hedge as much as anything else."
Top 10 suburbs for Adelaide investors – with budgets ranging from $450,000 upwards
Suburb State Postcode Median house price ($) 12-month price growth Kilburn SA 5015 $472,500 28% Christies Beach SA 5165 $460,000 18% Hallett Cove SA 5158 $600,000 15% Seaford SA 5169 $595,000 30% Moana SA 5169 $580,000 21% Semaphore SA 5019 $925,000 10% Semaphore Park SA 5019 $650,000 14% Exeter SA 5019 $722,500 30% Modbury SA 5092 $491,000 12% Valley View SA 5093 $521,000 23% "Property in South Australia is more affordable than in other more populous states, and while interest rates are still low, it remains cheaper to buy than rent, delivering further strong demand for houses," the report reads.
"There is a compelling case for investors to seriously consider a suburban house in Adelaide, particularly for those mindful of their entry price and seeking an attractive rental yield as property prices remain very reasonable."
What do buyers, sellers and investors need to keep in mind?
The market has been changing swiftly over the past few months, but the real estate cycle always brings peaks and troughs, and there may be positive news on the horizon.
"If you look further ahead, markets are actually expecting interest rates to start falling again next year. Inflation expectations over five and 10 years are already well anchored," Mr Wargent said.
His advice is to approach things with a level head and avoid getting swept up in the wave of media negativity.
"The pandemic has driven more short-term thinking. People tend to be short-term thinkers anyway, but the pandemic has really accentuated that because things have been changing so quickly," he said.
"I think whether you're a buyer or a seller, you probably just need to take a step back and try and think strategically — ask 'what's your 5 and 10-year strategy?' instead of responding to the next media headline, the next trend, talk about the next interest rate hike or whatever it might be."
