Strength of inner suburbs a myth: expert

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Whether it's Sydney, Brisbane or Melbourne, many property experts claim that the closest suburbs to the capital city centres of Australia are the best investments.

Despite the higher property prices, most new residents to these cities want to live as close as they can to the perks of city life and the infrastructure that goes along with it, including cheaper petrol costs, these experts reckon.

But another leading property forecaster, Terry Ryder, said recently that these claims are baseless and wrong. The cheaper, outer-lying suburbs turn out the best growth for investors, Ryder said.

"There is no truth at all to the claim that the 'good suburbs' close to the city are the best and safest investments and are better at resisting downtowns," Ryder said. "In fact, the figures prove it wrong."

In making his own claim, Ryder used Brisbane as an example, using Real Estate Institute of Queensland (REIQ) median price figures over the past five years.

Of 130 suburbs in the Brisbane City Council area, 29 had doubled their value by experiencing price growth above 100% during the five years to mid-2008. Of these 29 high growth suburbs, 20 had median prices below the Brisbane average with most priced in the $300,000s and a couple even lower than that, Ryder said.

The top three growth performers - Darra (201% growth), Carole Park (195% growth) and Inala (175% growth) - are "definitely not considered prime locations," said Ryder. All three are about 20km, or 30 minutes' drive, from the city centre. Only Darra, at $325,000, had a median price above $300,000.

In comparison, some of Brisbane's most expensive suburbs were poor performers over the same period, said Ryder.

"The facts are that in any capital city, the expensive inner suburbs are poor long-term performers in terms of capital growth," said Ryder. "Above all, their price patterns are volatile rollercoaster rides that can produce sharp declines, contrary to popular claims that they always hold their value."

Ryder cited statistics from his own property investment website, www.hotspotting.com.au, showing many investors were still under the impression that the inner suburbs performed best, though.

In response to the question of where it was best to buy for long-term capital growth, 40% said inner-city locations, 26% said sea change locations, 12% said regional centres, 11% said mining towns and 11% said outer suburbs.

"The myth is actually good news for those investors that can see past the hype," said Ryder. "Most buyers can't afford the expensive inner-city or waterfront suburbs, but who cares? The less favoured suburbs are cheaper, have higher income yields, and provide higher capital growth. It's a win-win situation."

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