Best suburbs - What makes a suburb a good investment

Date: 5th December 2011

Despite headline statistics about falling house prices in Sydney, Brisbane and Melbourne some individual suburbs are showing double digit growths. The fact is that with every market cycle there is accelerating growth then boom then bust, followed by a long flat period (of some years) as market volumes and prices find a new sustainable level.

Across Australia, different States grow at different rates and there are a multitude of factors that affect growth. If we look at the top 10 growth suburbs for houses in the past 12 months NSW and VIC dominate the results. To illustrate some of the startling performances of individual suburbs, we note that Sandhurst in Victoria achieved a 21.8 percent growth to $530,000 in the year to the end of September 2011.

The regional NSW town of Tamworth rose 21.1 percent in value to $317,000 in the same period, while the Sydney suburb of Sutherland rose 18.8 percent over the period to $605,000

Does this mean you should now go invest in these suburbs? Not necessarily. The simple fact is that one can say with some certainly that by the time the statistics are published it is already too late and you can invariably assume most of the growth has occurred
The opportunity smart investors have, is to invest in suburbs NOW, before the growth occurs, after a lengthy flat period, while others are still talking them down. Imagine being able to easily find hot suburbs BEFORE the growth occurs (we can show you how). The investor or home buyer would be advised to have a number of criteria that they could apply in order to have the best chance of buying in potentially high growth area.

For starters find property that you can purchase at least 10% under today’s fair market value. This is often the case where a market is experiencing heavy discounting which is evidenced by the percentage discount applied to the sale price in order to seal a sale. In some suburbs this is up to 10 percent in , while in some cities such as Melbourne the average discount is around 7 percent.

Other strategies may be to buy ‘worst house in best street’. Here the idea is that in popular suburb where renovation activity is high, an unrenovated property may offer value potential for upgrade. In other words the value growth would be larger than the costs of the renovation if done smartly and if the suburb is at least holding its value in the short term.