- Regional suburbs ruled, with 14 making the cut
- Metro locations were in outer ring suburbs about an hour from the CBD
- Suburbs were chosen where a 10% profit loss would have minimal impact
Online home loan lender Well Money has revealed its top 20 list of investment-grade suburbs where Australian property buyers have a 10 per cent negotiating advantage over vendors.
Eight Queensland suburbs made the list, with New South Wales featuring five, Victoria four, Tasmania two, and Western Australia one. The vast majority of suburbs to invest in were located in the regions (14), with metropolitan investment-grade suburbs typically in the outer ring about an hour away from the main city centre; 17 suburbs were housing markets, and the remainder units.
The new research, commissioned from property research consultancy Suburbtrends, began by considering every suburb in Australia, before filtering out suburbs:
- that weren’t investment-grade,
- where demand had not been falling, and
- where prices had not increased by at least 45 per cent over the past decade.
That left a small list of investment-grade suburbs where conditions are favourable to buyers and where investors know they have plenty of bargaining power – because by lowering their asking price vendors would still be giving up only a fraction of the profits they’d made in the previous decade.
Top 20 investment-grade suburbs
| Rank | State | Suburb | Postcode | 10-year price gain | Years of profit lost with 10% discount | ||
| 1 | NSW | Alstonville | 2477 | $491,000 | 1.1 years | ||
| 2 | VIC | Marong | 3515 | $348,000 | 1.3 years | ||
| 3 | NSW | Valla Beach | 2448 | $285,000 | 1.3 years | ||
| 4 | QLD | Caloundra West | 4551 | $435,000 | 1.4 years | ||
| 5 | QLD | Burleigh Waters | 4220 | $555,000 | 1.4 years | ||
| 6 | VIC | Highett | 3190 | $556,050 | 1.4 years | ||
| 7 | NSW | Kellyville Ridge | 2155 | $400,000 | 1.4 years | ||
| 8 | NSW | Kariong | 2250 | $415,000 | 1.4 years | ||
| 9 | NSW | Figtree | 2525 | $500,000 | 1.4 years | ||
| 10 | VIC | Somerville | 3912 | $510,000 | 1.5 years | ||
| 11 | QLD | Pomona | 4568 | $448,250 | 1.5 years | ||
| 12 | VIC | Donvale | 3111 | $501,000 | 1.5 years | ||
| 13 | QLD | Mountain Creek | 4557 | $453,995 | 1.5 years | ||
| 14 | QLD | Bald Hills | 4036 | $482,000 | 1.6 years | ||
| 15 | WA | Vasse | 6280 | $385,000 | 1.6 years | ||
| 16 | QLD | Mermaid Waters | 4218 | $555,000 | 1.6 years | ||
| 17 | TAS | Geilston Bay | 7015 | $344,000 | 1.6 years | ||
| 18 | TAS | Eaglehawk Neck | 7179 | $250,000 | 1.6 years | ||
| 19 | QLD | Glass House Mountains | 4518 | $420,500 | 1.6 years | ||
| 20 | QLD | Yarrabilba | 4207 | $450,500 | 1.7 years | ||
Source: Well Money.
Well Money CEO Scott Spencer said this ranking was designed to help investors who wanted to buy in quality locations and hold a negotiating edge over vendors.
“Buyers hold a negotiating advantage in each of these suburbs right now, because vendors have enjoyed capital growth of at least 45% over the past decade. So even if they were to reduce their asking price by 10%, they’d still finish well ahead,” he said.
“Another reason why buyers have the edge in these suburbs is because market conditions have been turning in their favour, as demand relative to supply has been falling.”
Mr Spencer also noted that the suburbs in this report are quality, investment-grade locations. “All of them have low inventory levels, which will put upward pressure on price growth, and low vacancy rates, which will put upward pressure on rental growth. So the data suggests that investors would be more likely than not to enjoy positive returns,” he said.
However, Mr Spencer urged investors to be prudent with their finances.
“Interest rates have been rising and will probably increase even further in the first half of 2023, so investors need to budget for higher repayments. It’s risky to enter the market if you don’t believe you’d have the capacity to cope with higher interest rates.”
How were these top 20 suburbs identified and ranked?
The point of the research was to identify investment-grade suburbs:
- where demand has softened – and therefore conditions have become more favourable to buyers, and
- where owners have enjoyed at least 45% price growth over the past decade – therefore buyers know vendors could afford to sell for a 10% discount.
The research began by considering every suburb in Australia. To make sure suburbs were investment-grade, they were excluded if:
- Their SEIFA socio-economic score was 4 or less,
- Their share of rental housing was less than 10%,
- Their vacancy rate was 1.5% or more,
- Their yield was 3% or less,
- Their inventory level was 6 months or more.
To make sure suburbs were favourable to buyers, they were excluded if:
- They had fewer than 5 listings,
- Their number of listings had grown by less than 3 month-on-month,
- Their inventory level was 1 month or less.
To make sure suburbs had enjoyed strong price growth over the past decade, they were
excluded if:
- Their median sale price had grown by less than 45% over the decade
That left a small list of investment-grade suburbs where conditions are favourable to buyers and where investors know they have plenty of bargaining power – because even if they offered a 10% discount, vendors would still be giving up only a fraction of the profits they’d made in the previous decade.
To establish a top 20 ranking, suburbs were then ranked based on the number of years of profit (from lowest to highest) vendors would have to surrender if they sold at a 10% discount.
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