The Property Professor's Top Australian Suburbs: A Guide for Investors and Home Buyers

By Peter Koulizos

The Property Professor’s Top Australian Suburbs is a handy guide for first time investors and homebuyers. 'Property Professor' Peter Koulizos takes readers through 107 Australian suburbs that offer the best return on investment. The book provides detailed statistical data in the suburb profile including information on demographic, average incomes and what plans local and federal government has for improving the area over the next 20 years.

• Focuses on suburbs that are currently undervalued
• Lists which streets within the suburbs will help investors and buyers reap the largest rewards
• Features the top 20 suburbs from Melbourne, Sydney, Adelaide and Queensland, the top 2 suburbs in Canberra and Darwin and the top 3 suburbs in Hobart
• Easy to use portable format with side tabs

• Language: English
• Publisher: Wiley
• Release date: Jan 26, 2012
• ISBN: 9781118319611

Book preview

Preface

With more than 3000 suburbs in our capital cities, there are many choices when it comes to selecting the best location in which to buy property. The Property Professor’s Top Australian Suburbs has been written to help both homebuyers and property investors with this decision by presenting the suburbs that are forecast to do well. Buying property in up-and-coming suburbs can give investors and homebuyers the opportunity to increase the equity and profit from their purchases just by holding assets in these locations. If you can make the right decision about where and what you buy, you will be able to sleep better knowing that when you wake up every morning your property will have increased in value and you will be that little bit richer!

How have the suburbs been selected?

The criteria for inclusion in this book are as follows. All suburbs must:

have potential for good capital growth over the next four to six years

have a reasonable median house price

be undervalued.

It is important to note that the suburbs listed in this book are not necessarily top suburbs now. Rather, they are areas that are on the way up, and their value is set to increase over the next few years.

Capital growth

The capital growth of a property depends on two key factors — where the property is located and what type of property it is. In addition, most investors and owner-occupiers hold onto a property for more than a year, so only suburbs that are forecast to increase in value over the next four to six years, and then continue to grow beyond this initial period, are included.

For significant capital growth to occur, a property needs to be in the right location — that is, it should be near one or more of the following:

the central business district. This is important as the CBD is where the highest concentration of jobs is and it means commuting time is reduced.

the sea. Close proximity to the sea has become increasingly popular over the last 10 to 15 years with more and more people choosing to move to coastal locations, and commute to work, as part of a lifestyle change. Properties with views of the sea will attract a premium.

a prime suburb. While prime suburbs can be too expensive to buy into, adjacent suburbs often have similar characteristics and are much cheaper. The redevelopment of an area can also help to increase the value of neighbouring suburbs.

amenities such as shopping centres, schools and public transport. Being within driving distance of a large regional shopping centre, such as a Westfield shopping centre, or in the zone of a highly sought-after secondary school, such as Kew High School in Melbourne or Norwood Morialta High School in Adelaide, can add tens of thousands of dollars to a property.

The features of the property itself also play a large part in the rate of capital growth. The two most significant attributes are the land and the type of property.

I need to stress here that the value in real estate is in the land. Over time, buildings get older and they depreciate; however, the land appreciates. Therefore, the more land you have, the more capital growth you should have.

The architectual style of a house can also see it attracting a premium, depending on what condition the house is in and if it has been renovated. The rarity of period-style homes, such as Edwardian, Victorian, Federation or Californian bungalows, makes them highly sought after. Suburbs with a high proportion of period-style homes that are ripe for renovation are often sought out by young professionals who generally buy with their heart, not their head, thus increasing the price of homes in these areas. These types of homes are particularly popular in Melbourne, Sydney and Adelaide.

Reasonable median house price

You won’t find suburbs such as Mosman or Double Bay in Sydney, Toorak or Brighton in Melbourne, Ascot in Brisbane, Peppermint Grove in Perth or Toorak Gardens in Adelaide in this book. These are already top suburbs and are very expensive. The 107 suburbs listed in this book are not only forecast to do well, but they are also reasonably priced—that is, their median house price is at a level that many people can afford to buy into. In the overview of each capital city, I have included its median house price as a comparative guide. Most of the suburbs listed are priced below the capital city’s median, but some are above it.

Undervalued

There are many cheap suburbs in our capital cities, but only a few that are undervalued. Cheap suburbs are usually valued poorly because of their low-quality housing, high concentration of industry or because they are located near undesirable features such as a rubbish dump or sewerage works. Undervalued suburbs are also relatively cheap, however they have the potential to grow in value. This future growth can be put down to a number of factors:

gentrification of the area. An area that is run-down may experience a rebirth. This occurs when, for example, old, neglected homes, often period-style, close to the CBD attract new owners and are renovated. Or when local councils spend money to improve the streetscape by repairing and widening roads, paving footpaths and planting trees. Suburbs that have been gentrified recently and have increased in value include Richmond in Melbourne, Newtown in Sydney and Mile End in Adelaide.

public money spent in the area. Major infrastructure upgrades — such as a new train station or bus interchange, freeway or main road — can kick-start future growth by decreasing travelling time to the CBD.

private money spent in the area. A shopping centre could be expanded and upgraded to include more shops, food outlets and entertainment; for example, Westfield Chermside in Brisbane and Westfield Marion in Adelaide.

Compiling the profiles

Extensive research was undertaken to evaluate each suburb and compile each profile. This involved interviewing local property experts, analysing reports and articles on the property market and the suburbs, and, most importantly, visiting each of the 107 suburbs listed. While the first two methods are valuable for gathering information, the best way to decide whether a suburb is worthy of making your short list is to actually visit the area. Travelling down the side streets, walking through the shopping centres and observing the people that live in the suburb are excellent ways to get a true picture of a suburb.

Please note, this book is not meant to act as advice nor is it a substitute for your own research. Remember, an educated and informed decision will maximise your chances of making money and minimise the risk of losing money.

Happy house hunting!

Peter Koulizos

Adelaide

August 2008

Introduction

The top 107 suburbs are grouped by capital city and comprise 20 suburbs from Adelaide, Brisbane, Melbourne, Perth and Sydney; three suburbs from Hobart; and two suburbs from Canberra and Darwin. At the beginning of each section an overview of the city and a map showing each profiled suburb are included. A common format has been used for each suburb, for ease of comparison. Each profile begins with an overview of the suburb, followed by the reasons for investing in the suburb, and the areas to focus on and to avoid. Tables have also been included to provide a snapshot of the suburb.

Overview

The overview aims to create a picture of what the suburb looks like. It describes the housing, the streetscape and the general ambience. Greater detail about the amenities and services in the suburb is also provided, including shopping facilities, schools, transport, hospitals and noted parks or reserves.

An overall rating is also given to each suburb. A star ratings system is used and is based on how well the suburbs meet the core criteria (outlined in the preface).

Tables

The first table provides the following general information about the suburb:

population. This figure is as reported in the Australian Bureau of Statistics 2006 Census Quickstats.

distance from CBD. This is the distance and direction from the central business district.

distance to sea. This is the distance to the nearest beach or coastline.

number of schools. This figure includes private and public, primary and high schools.

shopping facilities. This is reported as ‘limited’ if there are no shops in a suburb or only a small shopping precinct, ‘adequate’ if there is at least one medium-sized shopping precinct in the suburb, or ‘extensive’ if the suburb has a large regional shopping centre or there are many shops in a shopping strip.

public transport. The types of public transport available are indicated by the following symbols:

bus

train

tram

ferry.

amenities. The types of amenities are indicated by the following symbols:

airport

childcare centre

church

medical facilities (including hospitals and general practitioners)

parkland

sportsground

swimming pool.

The second table focuses on the suburb’s housing and includes the following data:

median house price. This is the 12-month median house price to 31 March 2008 (figure supplied by RP Data; figures for Hobart supplied by the Real Estate Institute of Tasmania).

median unit price. This is the 12-month median unit price to 31 March 2008 (figure supplied by RP Data; figures for Hobart supplied by the Real Estate Institute of Tasmania).

percentage of separate houses versus flats/units. Two figures are shown. The first is the percentage for the suburb and the second (in brackets) is the national percentage. (These figures are as reported in the Australian Bureau of Statistics 2006 Census Quickstats.)

median block size. This is the median house block size (figure supplied by RP Data; figures not available for Hobart).

type and era of properties. This description provides a snapshot of the housing in the suburb.

The third table provides the following data about the suburb’s residents and compares it with the national average (these figures are as reported in the ABS 2006 Census Quickstats):

gender. This shows the percentage of males and females.

country of birth. The three most common countries of birth are listed.

income (weekly). This is the median weekly household income.

rent (weekly). This is the median weekly rent for all property, including houses, flats and units.

homeownership status. These figures show the percentage of homes fully owned, being purchased or rented.

household type. These figures show the percentage of family, lone-person and group households.

Why you should buy here

This section outlines the reasons the suburb is worth buying into. Some of the key factors include the suburb’s proximity to the city, sea or nearby prime suburbs. Any opportunities for development — that is, buying a property, redeveloping the site and building two or more dwellings — and for renovation are also noted. In cities such as Sydney, Melbourne, Adelaide and Brisbane there are many renovation opportunities due to the number of period-style homes. Hospitals and universities in the area help to add to the rental pool of potential tenants due to the number of people that either work or study at these institutions. The presence of these large establishments helps keep the vacancy rate low and rents high, which is beneficial for property investors. Finally, infrastructure planned by the private and public sector is a good indicator of capital growth in an area, so any future or recently completed major developments are mentioned.

Areas to focus on

Some localities within a suburb are better than others and these are noted in this section. The reasons they are worth looking into include close proximity to the waterfront or cafe strip, views, tree-lined streets full of period-style homes and whether an area is set to be rezoned (which can allow investors to build multiple dwellings). What these reasons add up to is potential for good capital growth.

Areas to avoid

Even though a suburb is included, this does not mean that the entire suburb is ideal. Some areas, such as those under a flight path or adjacent to a train line, factories, high-voltage power lines and cemeteries, and busy main roads are best left alone.

Part I

Investment basics

Chapter 1

Investment—what’s it all about?

In the past decade the popularity of investing has skyrocketed. More and more people have started taking control of their financial future so they do not have to rely on the government’s age pension down the track. Before going any further, let’s be clear about what ‘investing’ actually means. If you purchase a property, put money into a term deposit or buy a rare stamp to sell at a later date, you are investing your money. You are giving up the opportunity to spend the money now on something else because you expect to earn more money from the asset in the future.

In the case of putting your cash into a term deposit, the future benefit is almost certain. For example, if you were to put $10 000 into a term deposit for one year at an interest rate of 8 per cent, at the end of that year you should get back your $10 000 plus interest of $800.

In the previous example, your future benefit is certain. However, this is not the case with all asset classes. When investing in the sharemarket or property market, for example, your future benefit is quite uncertain. Indeed, there is always a certain amount of risk involved with investing. Let’s take a look at the main asset classes — cash, fixed interest, shares and property — and explore how they weigh up in terms of return, risk, capital growth, income and liquidity. Table 1.1 (overleaf) summarises the relationship between the four asset classes.

Table 1.1: the four asset classes

Cash

The most common way for people to invest in cash is to put money into a bank account such as an online high-interest savings account. Compared with the other asset classes, a cash deposit provides a relatively low return (at the time of writing, about 8 per cent per annum), but it is also a very low-risk asset. You can be fairly confident that not only will you get your money back, but you will also earn interest on the amount you invested. The cash deposit won’t grow in value, you will just receive interest income based on how much you invested, how long you invested for and the interest rate. On the plus side, cash is a very liquid asset — that is, you can access your money quickly.

Fixed interest

Similar to cash, a fixed-interest investment (government or corporate bonds) is a low-risk, low-return investment. You will receive a return of, at the time of writing, about 8.5 per cent per annum, but your money is guaranteed by the government or corporation. You can also be confident with this type of asset that you will get back all your money and receive regular interest payments. Again, your initial investment will not grow in value, but you will receive income from the interest earned. You also have reasonably good access to your money as you should be able sell your bond on the market within a day.

Shares

The sharemarket is attractive to many investors because of the relatively high returns it offers. Compared with the other asset classes, shares have the highest capital growth (over 10 per cent per annum) — and the highest risk. Share investors expect that their initial investment will grow in value and that they will earn a dividend (income) while they hold on to the shares. This is not always a certainty, though. Many people have lost money on the sharemarket when the value of their shares has fallen unexpectedly, so share investors need to be prepared to invest for the long term in order to ride out market turbulence. On the plus side, shares are a very liquid asset — they can generally be sold within a day.

Property

Like shares, property is a growth asset. It has a moderate return, which is accompanied by a moderate risk. Historically, the capital growth in property (about 9 per cent per annum) has been slightly lower than for shares, but so is the risk. One of the attractions of property is the security that it offers. Investors can expect to make a profit from a property if it is well located and they are willing to hold on to it for the long term. The value of the property will increase over time and investors will also receive income in the form of rent. Some people do lose money on property, but this tends to be because they have bought the wrong type of property in a poor location and sold during a market downturn. In addition, property is not a liquid asset. You cannot sell it and access the funds quickly, unlike the other three asset classes.

In summary, there is little risk investing in cash and fixed interest, but there is also little reward. By investing in growth assets — shares and property — you are taking on greater risk, but the potential rewards are greater too.

So, what is smart investment all about? It is about maximising your return and minimising the risk. When it comes to property, smart investment means buying the right type of property in the right location. The next chapter takes a closer look at why a growing number of Australians are choosing to invest in property.

Chapter 2

Why invest in property?

The great Australian dream is to own your own home. It is built into our psyche that owning property is something to strive for and be proud of. And today, three out of four properties are bought by owner-occupiers.

Before you start investing in property, however, you need to ask yourself: what is my goal? Do you want to:

retire richer?

retire earlier?

supplement your income?

give up your day job?

Buying the right type of property in the right location will help you to achieve your goal. It is important to establish what your goal(s) is at the outset because it will determine which strategy — renovate, develop or buy and hold — you apply.

But why choose to invest in property rather than the other growth asset — shares? There are