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  • Inner-city gems like Darlinghurst and Surry Hills made the list
  • The housing downturn to open up investment opportunities
  • Property downturn likely to remain until end of 2022

If real estate is the apple of Australian investors’ eyes, does a market downturn turn it into similarly delectable but unusually shaped fruit?

While the dad jokes come out to play, the market does certainly feel a little pear-shaped for many as news headlines continually bombard people with the apocalyptic nature of rate rises, inflation, and a host of other harbingers of daily doom.

But is the gloom warranted and what can you do if you’re looking to invest?

Housing downturn and mortgage stress

In a recap of things so far, we’ve heard news that just over one in four (26%) Australians will experience mortgage stress, the term defined by the Australian Bureau of Statistics as a situation where over 30% of after-tax income is spent on mortgage repayments.

The mortgage stress research by Savvy said that the number extrapolated out to the general adult population means over 5 million Aussies are concerned about keeping up with mortgage payments.

The rental market also seems to be stabilising, as vacancy rates flatline around most of the country, and rents are expected to surge by up to $5,200 in the next two years.

We can also be confident rates will rise: Adam Empringham noted in mid-June that Westpac then expected the cash rate will increase and settle at about 2.25% in May 2024, and more recently, BuyersBuyers’ Pete Wargent said there is a prospect of the cash rate potentially hitting 3% by the end of this year.

Mr Wargent also noted earlier this month that a housing market downturn is likely to be short-lived, more here.

Real estate downturn ahead

An opportunity for counter-cyclical investors may be arising with a housing market downturn likely, according to Pete Wargent, co-founder of BuyersBuyers.

“The Australian economy has rebounded far more quickly than anyone could have dared to hope but combining the rebound in demand with supply chain disruptions means that the second half of 2022 will see some of the highest headline inflation prints in approximately three decades,” said Mr Wargent.

“The prospect of the cash rate target potentially rising from close to zero towards 3 per cent by the end of this year will be a serious handbrake on housing market sentiment and activity, not least because so many younger borrowers have never experienced interest rate hikes before, let alone the fastest tightening cycle since 1994.

“Our best estimate is that the property market downturn will continue for as long as borrowers fear rising mortgage rates, led by Sydney and Melbourne, and this is likely to mean for at least the remainder of 2022.

“The flip side to this is that the underlying housing market fundamentals are strengthening, with immigration visas set to be fast-tracked to address Australia’s skills shortage, the lowest unemployment rate in 50 years, and incomes now rising.”

Top 10 Sydney investment suburbs

BuyersBuyers recently released its Investor Special Report for 2022-23, BuyersBuyers CEO Doron Peleg said, “using our unique housing market analysis tools, we have not only taken a macro view in our Investor Report, but we have also identified some of our favourite suburb picks and investment hotspots.”

“In New South Wales, we expect there to be a sharp rebound in sentiment and activity in early 2023, especially in the sub $1.5 million price brackets, as the long-discussed stamp duty reform kicks in for first homebuyers from January. All of our suburb picks for houses and units therefore reflect this, as well believe the property market recovery will be driven from then entry level price points upwards,” Mr Peleg said.

New South Wales Top Suburb Picks, Houses

Suburb Region Postcode Property type Number 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
Moss Vale Shoalhaven 2577 House 3,260 $1,088,656
Ulladullla Shoalhaven 2539 House 2,786 $999,673
Mittagong Wollongong 2575 House 2,145 $1,080,602
Nelson Bay Hunter Valley 2486 House 2,486 $1,059,037
Albion Park lllawarra 2527 House 4,134 $921,756

Source: BuyersBuyers.

BuyersBuyers’s top pick for unit investments in Sydney was Randwick, with a host of inner-city gems like Surry Hills and Darlinghurst also making the list.

New South Wales Top Suburb Picks, Units

Suburb Region Postcode Property type Number 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

Source: BuyersBuyers.

The only suburb to feature on both the BuyerBuyers list for best Sydney suburbs to invest in and Well Money’s research was Albion Park. Well Money’s top 20 investment-grade suburbs details here.

Best investments in Sydney also varied from last year’s figures from ME Bank, with NSW suburbs to invest in including Concord, Pyrmont, North Sydney, Coffs Harbour, Waterloo, Rozelle, and Five Dock.

Of course, methodologies and metrics change from one piece of research to the next, click through to each link to see more about each list.

Best places to invest in Melbourne

Melbourne is one of the best places to invest, or so it seems. Mr Wargent said the Melbourne market has been significantly impacted by extended lockdowns and Covid restrictions, with large numbers moving to Queensland.

“The relative underperformance of the Melbourne market means that there are some attractive deals on offer for counter-cyclical investors in suburban houses. Some counter-cyclical investors are also now looking at investment grade units in Melbourne, after a decade of underperformance, particularly where they can find assets with a point of security,” said Mr Wargent.

Melbourne Top Suburb Picks, Houses

Suburb Region Postcode Property type Number 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 East 3073 House 12,556 $1,025,038
Preston North East 3072 House 9,164 $1,283,961

Source: BuyersBuyers.

Melbourne Top Suburb Picks, Units

Suburb Region Postcode Property Number 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

Source: BuyersBuyers.

The only suburb to appear in Well Money’s top 20 from Victoria was Marong, with no Victorian suburbs making the list in ME Bank’s list.

Worst places to invest in Victoria, however, include Yarrawonga, Diggers Rest, and San Remo, according to research from Suburb Help.

Best Queensland investments

Top Brisbane suburbs to invest in, along with the best Gold Coast investments, and Sunshine Coast investments are all extremely popular at the moment and it seems to make sense why:

“In south-east Queensland the rental market remains extraordinarily tight following the fastest net interstate migration to the state in Australia’s history, which is still continuing,” said Mr Wargent.

“SEQ has benefited from remote and flexible working arrangements more than any other state, and there are some excellent opportunities to buy houses in Brisbane, Gold Coast, and Sunshine Coast. Price growth has been strong over the past 18 months in Queensland, so investors need to be discerning, buy carefully, negotiate hard, and take a long-term view, perhaps out to the 2032 Brisbane Olympics.”

South-east Queensland Top Suburb Picks, House

Suburb Region Postcode Property type Number 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 3,547 $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

Source: BuyersBuyers.

South-east Queensland Top Suburb Picks, Units

Suburb Region Postcode Property type Number 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

Source: BuyersBuyers.

For the top 20 nationally, Well Money research picked Tugun, Currumbin Waters, Twin Waters, Little Mountain, and Meridan Plains, with ME Bank’s top 20 picks including Fairfield, Miami, Mermaid Beach, Burleigh Heads, and Woolloongabba. No Queensland suburbs made the list for investments to avoid.

Top Adelaide investment suburbs

Mr Wargent said that after a relatively quiet decade a looming rental crisis and relative affordability is driving a tremendous surge in interest from investors looking to buy in Adelaide.

“Two of the key features of the past couple of years have been a ‘race for space,’ and water as a drawcard for property buyers. Some of Adelaide’s beachside suburbs tick both of these boxes, and from relatively attractive price entry points as compared to the larger capital cities.”

South Australia Top Suburb Picks

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 Vew SA 5093 $521,000 23%

Source: BuyersBuyers.


Disclaimer: This article contains general information and should at no time be considered advice to the reader. The reader should always verify their situation with the relevant certified professionals before taking any further steps. 

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