Australia’s top suburbs to invest in

• 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

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

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

Source: BuyersBuyers.

Melbourne Top Suburb Picks, Units

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

Source: BuyersBuyers.

South-east Queensland Top Suburb Picks, Units

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

Source: BuyersBuyers.

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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.