A new report from Hotspotting proves why the adage “Do not judge a book by its cover” may sometimes be true in investing in residential property — five locations which are considered as cheapies turn out to have the potential for substantial capital growth.

Hotspotting director Terry Ryder said the identified locations are considered to be the “ugly ducklings” of city real estate, but they have the potential to transform into “swans”.

“There are suburbs, once considered primarily industrial in nature, which have changed through urban renewal into thriving residential areas with steady price growth,” he said.

“The significance of these areas in the residential market has grown because affordability has become a headline issue in the housing industry, which is one reason why the cheaper areas of our capital cities have recorded good capital growth over time.”

The five locations were identified based on the following property metrics:

  • Rising sales activity and potential for capital growth
  • Strong supply of affordable houses
  • Robust infrastructure — existing and planned
  • Proximity to major jobs nodes

Mr Ryder said the cheaper areas in major cities have been leading the resistance to the downturn.

“Recent research has shown the cheaper areas undergoing gentrification are among the strongest performers on price growth in our major cities, but not all of the cheaper areas have the potential to evolve into real estate swans, but some of them do,” he said.

Here are the top five “ugly ducklings” investors and homebuyers must consider this year:

City of Playford, South Australia

The City of Playford is the fastest-growing LGA in South Australia with multiple major job nodes. It also serves as the state’s logistical and distribution capital.

Some of the major selling points of the City of Playford are the following:

  • Affordable housing and high yields
  • Edinburgh Defence complex
  • $175 million Playford Health Hub
  • $250 million Playford Alive Town
  • Centre development

“Typical houses are in the mid-high $300,000 ranges, yields above 5% can be found and vacancy rates are close to zero. For buyers on a budget, these suburbs are worth considering,” Mr Ryder said.

City of Armadale, Western Australia

The City of Armadale is the fourth fastest-growing local government area in Western Australia and has some of the most affordable houses of any capital city.

“The City of Armadale has been marked for future infrastructure development by the Federal Government, encouraging business, industrial and residential projects,” Mr Ryder said.

“The revival in this precinct is supported by some of the lowest vacancy rates – currently well below 1% – in the Perth metropolitan area.”

Below are some of the major highlights of the City of Armadale:

  • Strong population growth
  • Large industrial areas (jobs nodes)
  • $4 billion container port
  • $1 billion hydrogen plant
  • $635 million rail line and station
  • $237 million upgrade to Armadale Rd
  • $4.3 billion shipbuilding project

City of Salisbury, South Australia

Despite the impacts of the COVID-19 pandemic, the City of Salisbury was able to defy the slump in economic activity — a construction boom made up of medium-scale projects was able to help in generating thousands of jobs.

“Construction on the $1.9 billion Edinburgh Parks Precinct is now under way and is dedicating space to multiple industries including aerospace and manufacturing, defence technology, food manufacturing, logistics support and automotive industries,” Mr Ryder said.

“This is attracting major companies to Salisbury, which is further boosting employment prospects and activating the property market.”

Here are some of the major selling points of the City of Salisbury:

  • Defence projects worth $4 billion-plus
  • $1.9 billion Edinburgh Parks Precinct
  • $885 million transport corridor
  • Gawler train line electrification
  • $250 million GMH site redevelopment
  • $240 million health hub

Mr Ryder said all major infrastructure and construction activity in this location has buoyed the property market, bringing rents, yields, and vacancy rates at their most competitive level.

“Along with affordable house prices, this attractive combination is providing opportunities for entry-level investors,” he said.

City of Gosnells, Western Australia

The City of Gosnells is home for many young couples and families who can benefit from the available government incentives for first-home buyers.

“Gosnells has some of the most affordable houses of any capital city — Gosnells and the surrounding suburbs have been earmarked for future infrastructure development by the Federal Government, encouraging business, industrial, and residential projects,” Mr Ryder said.

These are some of the factors boosting the potential of the City of Gosnells:

  • Strong population growth
  • Large industrial areas (jobs nodes)
  • A Strategic Employment Area
  • $4 billion container port
  • $1 billion hydrogen plant
  • $2.5 billion in road upgrades
  • $4.3 billion shipbuilding project

City of Ipswich, Queensland

Ipswich City attract steady buyer demand due to its affordability and proximity to employment nodes.

Mr Ryder said jobs growth and population increases are two of the hallmarks of the local economy.

“For some years it has been one of the fastest-growing regions in South-East Queensland and it has become one of the top two SEQ regions for jobs growth,” he said.

“Ipswich has shown strong property price growth in the past – prices rose strongly in the five years to 2009 – and delivered further strong uplift in 2021 and 2022.”

Below are some of the significant factors driving the City of Ipswich’s appeal:

  • Strong economy
  • Multiple jobs nodes
  • RAAF Base Amberley expansions
  • Proposed $1.7 billion fast rail link
  • $5 billion ADF contract
  • $12 billion Springfield community
  • $1.5 billion Springfield rail link
  • $1 billion Citiswich project
  • $2.8 billion motorway upgrade

Top tips for property investors in 2023

Aus Property Professionals director Lloyd Edge said there are a lot of factors that determine whether an investment property is a good deal or not, and location is only one of them.

“At the end of the day, it all comes down to each individual investor, and what their strategy and goals are,” he said.

Here are some of Mr Edge’s top tips for investors this year:

  • Consider the age and income of the local population and their potential to pay high rent or buy a property.
  • Identify the types of properties that are in high demand and have a strong potential for capital growth.
  • Consider whether a renovation might increase the property’s value, or whether the block of land is big enough to do a subdivision.
  • Be aware of the current state of the property market and take advantage of opportunities created by changes in market conditions.
  • Invest time in researching the local market and thoroughly evaluating properties before making a purchase — look at comparable sales, rental prices, and local demographics.

Photo by hansben on Pixabay.