Are you ready to shop for bargains, but not sure how to tell the difference between “bottomed out” and “down and out”? We dig deep into the numbers and identify 10 key suburbs to watch across the country, where strong fundamentals point to real strong returns for investors looking to pounce on an undervalued market.
NEWTOWN, NSW (Units)
Average discount: 4%
Signs of bottoming out:
Like many Sydney suburbs, Newtown’s unit price has also slowed during 2010 and 2011, but it appears that buyers are now back in a big way.
During the 3 months ending November, the number of sales rose by 8%, pushing median price to $417,000 according to RP Data. Another sign of rising demand is the improving yield, thanks to rising rents. During the 12 months to March, rents jumped $80 per week or up 19% compared to the year before. Properties are selling within a month of listing on average, which indicates demand continues to remain hot in the area.
“As investment opportunities go, Newtown is not overrated,” says A1 Property Finders managing director Monique Llanes. In the long term, I suspect it should do rather well. It’s an area that is continually changing, and rents keep going up.”
Newtown’s location 2km from Sydney’s central station and 1km from the University of Sydney is also one that would be hard for investors to beat.
For more information on Newtown, take a look at our Suburb Profile
KINGS PARK, NSW (Houses)
Average discount: 6%
Signs of bottoming out:
House prices have started to recover during the past couple of months, rising by 1% over the 3 months ending November according to RP Data. The number of properties sold rose 7% compared to the previous quarter. The number of potential buyers has more than doubled during the past two months - 44 potential buyer for every listed home according to realestate.com.au.
Median rents have also increased solidly –$40 a week higher than a year ago according to Residex. Gross rental yield is currently sitting at 5.33% as vacancy rate drops to 1.22%.
Kings Park is one of the smaller suburbs within the Blacktown area, and is one of Western Sydney’s best served suburbs for transport. Nearby suburb Kings Langley is much larger, but with an average asking price of about $120,000 more.
“Kings Park feeds largely off of the popularity of Kings Langley, quite an affluent suburb that’s hard to get into. When buyers can’t get in there, they often choose Kings Park, which offers a similar deal, but at a much more affordable price,” says Brett Watkins, a senior sales consultant at Century 21-Quakers Hill.
For more information on Kings Park, take a look at our Suburb Profile
UPWEY, Vic (Houses)
Average discount: 6%
Signs of bottoming out:
Buying activity has been robust during the past three months with the number of sales nearly doubling the volume sold during the same period last year. House prices appear to be recovering as well, adding 8% during past 12 months. Demand continued to strengthen as shown by the high clearance rate and the large number of people looking to buy in the area. According to realestate.com.au, the number of potential buyers has more than doubled during the past two months -70 people for every available property. At the same time, the number of available stock has fallen by 20% between November and January. Landlords are also poised to see rental increases as vacancy drops to virtually zero.
Upwey might be one of Melbourne’s best kept secrets. Situated at the foot of the Dandenong Ranges, some 30km south-east of the CBD, the area is home to an eclectic mix of cheaper and more expensive houses, with a large contrast in property sizes.
Bell Real Estate-Belgrave senior sales consultant and licensed real estate agent Jarrod Peterson says the area is popular with upsizers, especially couples wanting to start new families.
“For a lot of people there’s something special in saying they live in ‘the hills’,” he says. “For investors the area has great capital growth potential. It’s still largely underrated. The prices are very affordable and lately there’s been a lot of demand.”
Although a large portion of residents work in the city, the area is not devoid of nearby employment opportunities. The Upwey township also has plenty of cafes and restaurants, with easy access to the CBD.
For more information on Upwey, take a look at our Suburb Profile
UPPER FERNTREE GULLY, Vic (Houses)
Average discount: 7%
Signs of bottoming out:
Median price has trended down much of 2011, however, there are signs that prices are stabilising. During the past 12 months ending November, median house price rose 1%.Over the past 3 years, it has grown by a mere 13% in total, well below the 10% average annual growth it recorded over the past 10 years, which indicates that strong growth is well overdue. The number of sales has also started rising – up by a third, compared to the same period last year. The number of people looking to buy increased by 69% during the past two months – that’s 63 people for every available house according to realestate.com.au. This comes as the number of listing continues to fall.
Upper Ferntree Gully offers what few Melbourne suburbs can at affordable prices: great lifestyle choices. It is a roughly 50 minute drive or an hour train ride to the heart of the CBD, but has surroundings that closer resemble the countryside.
“It’s a great location for picking up quarter acre blocks and larger for affordable prices, so it appeals to young families and couples wanting to move away from the inner city,” says Jarrod Peterson, senior sales consultant at Bell Real Estate-Belgrave. “There’s no new development going on in the area, so supply is also tight.”
The area is well served by hospitals and sports facilities, with other amenities such as schools and shopping complexes in nearby suburbs.
For more information on Ferntree Gully, take a look at our Suburb Profile
GATESHEAD, NSW (Houses)
Average discount: 7%
Signs of bottoming out:
The suburb has been racking up around 10% average annual growth over the past 10 years; however, growth over the past 3-5 years has been well below that. There are now signs that the property market is on a rebound. Sales activity has started picking up over the past three months and already surpassed the volume of transactions during the same period last year with a 20% increase. This resulted in a modest increase in house price during that time. Its affordability is a big draw to families who are priced out in the neighbouring suburbs such as Charlestown where median house price sits at around $390,000.
Gateshead is one of the few suburbs in the Newcastle region where you can count on finding a house for under $300,000. It is just 6km to the beaches at legendary surf spot Redhead and a quick commute into Newcastle. That is moving the area up on the lists of first time home buyers especially, says local agent Damon Ellis.
“You’re seeing a lot more activity there recently,” he says. “For example, I’ve got a couple who are looking at buying in Gateshead at the moment and they’re relocating from Queensland and their main things are affordability and being close to the beach. Redhead has recently become one of his favourite surfing spots.”
Ellis says investors are also starting to take notice of Gateshead, which boasts strong rental yields of above 6% and a tightening rental market. The expanding Lake Macquarie Private Hospital means investors can count on a good pool of medical professionals looking for rental housing.
For more information on Gateshead, take a look at our Suburb Profile
LAKEMBA, NSW (Units)
Average discount: 7%
Signs of bottoming out:
Sales activity ramped up significantly during the three months ending December with the number of sales transaction rising by 20% compared to the same period last year according to Residex. Median rents for units jumped solidly- up $40 per week to $340 compared to a year ago, which indicates demand is outstripping supply in a big way.
The healthy demand pushed median up by 4% during the quarter. The 12 month growth of 8% is still well below the 2011 and 2010 performance when unit prices rose 12% and 15% respectively, which means the current level offer a significant discount for savvy investors looking to buy into the area.
The rising rents now again appear to be pushing some renters into buyers, says local agent Lee Knapton of Knapton and Co. Real Estate. “Investors certainly haven’t gone anywhere especially with the rental yields the way they are.” Gross yields above 6% are very common with a 2 bedroom apartment renting for as much as $400 per week.
For more information on Lakemba, take a look at our Suburb Profile
CHARNWOOD, ACT (Houses)
Average discount: 7%
Signs of bottoming out:
The housing market appears to be bouncing along the bottom with prices stuck around the $380k- $390K range. However, market activity is ramping up with buyers snapping up higher priced properties and pushing the number of sales to 56 houses over the past 12 months. The turn over time is relatively short at just over two months. Demand appears to outstrip supply as shown by high clearance rate and the low level of stock up for grabs. According to DSRscore.com.au, only 0.9% of the total properties in the market are available for sale. The rental market is just as tight with vacancy rate sitting at 0.67%. Investors are now getting an extra $20 a week rent on average compared to a year ago.
No longer a fringe suburb of Canberra, Charnwood is emerging as a cheap and popular alternative to nearby Dunlop, where properties often sell for more than $100,000 higher. The area’s relative affordability could spur buyers to the area, driving up prices. It offers much of what Dunlop offers too: large block sizes, set upon hilly streets with great views of Canberra.
“Charnwood’s infrastructure is good,” says Dennis Vlandis of LJ Hooker-Belconnen. “It is a short drive to Belconnen centre and many of the federal government offices. The housing there appeals to a broad range of people, and is especially popular with young families.”
For more information on Charnwood, take a look at our Suburb Profile
SPENCE, ACT (Houses)
Average discount: 4%
Signs of bottoming out:
The level of stock in the market has been steadily falling since November and is currently sitting at just 0.33% of the total properties in the suburb, which is a reflection of the suburb’s tightly-held status. There is also a low level of discounting, which suggest that vendors are not under pressure to lower their asking price – also an indication that confidence is returning in the market. Turnover is pretty fast with houses selling within two months of listing.
Median rents are rising strongly too. Landlords are now getting an extra $70 per week on average, pushing rental yield to around 5%.
Dennis Vlandis of LJ Hooker-Belconnen reports that many of Spence’s houses are set upon blocks of land that are substantially larger than the houses usually found a little closer to Canberra’s centre. This makes them a good choice for upsizers: expanding families and couples in their mid to late-thirties who have grown weary of living in Canberra’s inner suburbs.
“Many of the properties in Spence back up onto Mt. Rogers, so they can be quite appealing,” he says, adding that Spence could have great investment potential as soon as active buyers start returning to the market in full force.
For more information on Spence, take a look at our Suburb Profile
WARNBRO, WA (houses)
Average discount: 9%
Signs of bottoming out:
The housing market appears to be stabilising after dropping in 2011. During the three months ending November, the rate of fall has slowed 1% amid confidence returning to the Perth market. The number of days on the market has also shrunk to 100 from 104 in the previous quarter. The number of people looking to buy in the suburb nearly doubled during the last two months according to realestate.com.au. At the same time, the level of properties listed for sale has steadily declined – down 29% over the past three months. Rents are trending up as well – up $20 per week compared to a year ago.
Warnbro is one of the few Perth suburbs where it is still possible to get an ocean side house for around $300,000. This, coupled with its easy access to the CBD, good schools, roads and other amenities, should see demand pick up.
“It’s probably about time for Warnbro to start growing again,” says Liz Sterzel, Property Wizards buyer’s agent. “It has got a lot to offer families who value lifestyle choices. It is easy to get to Perth, but there are also plenty of employment opportunities in the area and it’s a nice coastal suburb.”
Sterzel expects modest price increases in the short term, but says that in the longer term it could be a strong place for buying and holding. As part of Rockingham Shire, the area has plenty of schools, roads and other amenities and offers good family homes. Shopping centres abound and Warnbro Sound, the suburb’s beach, is one of Perth most beautiful.
For more information on Warnbro, take a look at our Suburb Profile
QUEENS PARK, WA (houses)
Average discount: 5%
Signs of bottoming out:
Prices appear to be stabilising with the November RP Data figures showing just a slight dip in house prices in the suburb. The recent sales also showed buyers are now targeting higher-priced homes (high $400’s) which will likely lift the median higher in the near term. Rental demand continues to strengthen as reflected by the low vacancy rate of just 0.5% and rising rents. Landlords are now getting $10 more each week on average compared to a year ago or a gross rental yield of around 6%. The level of buyer interest based on internet searches rose 33% during the past three months according to realestate.com.au.
Ray White Cannington principal Michael Smart says the area offers some of the largest blocks of land available within 11km of the CBD. “There are a lot of redevelopment opportunities within Queens Park, and is attracting many mums and dads investors and first home buyers. The area has good infrastructure and, for its location, it is good value.”
Smart says that with the recent amount of development in the area, the unit market is a little on the oversubscribed side, but that houses show good potential. “On the large blocks of land, demand from developers is good thanks to its close proximity to the CBD.”
For more information on Queens Park, take a look at our Suburb Profile
