But does such a simple strategy actually work, and which suburbs in south-east Queensland offer the best prospects for such investors?
The “ripple-effect” (also known as the “bridesmaid investment strategy”) involves the belief that capital growth ripples out from the most desirable suburbs to the less desirable suburbs that happen to be in close proximity. But while being situated next to a blue-chip suburb with a trendy café lifestyle, strong house price growth, or unrestricted access to water is never a bad thing, it doesn’t mean the neighbouring suburb will necessary produce the same stellar results.
According to Simon Pressley, head of market research at Propertyology, it’s good for homebuyers and investors to look at other potentially high-growth suburbs, not just the ones that are near the blue-chip suburbs.
Homebuyers and investors also need to consider the features of each location and not just rely on its proximity to blue-chip suburbs to determine value and profitability. This is especially true if the neighbouring suburbs are flood-prone, or are too close to industrial complexes and airports. These and other factors can greatly reduce buyer demand.
Pressley doesn’t discount the ripple-effect strategy altogether. However, the suburbs must have other economic fundamentals in place to underpin future performance, including affordability.
In south-east Queensland, Pressley’s top picks for ripple-effect investors include Lutwyche, Wooloowin, Geebung, Kedron, Labrador, and Caloundra.
According to data from the Domain Group for the six months until September, the median house price in Lutwyche was $751,000. In Wooloowin, it was $788,000.
Geebung recorded a median house price of $519,500, and Kedron recorded a median house price of $635,000.
During the same period, Labrador recorded a median house price of $430,500, and Caloundra recorded a median house price of $535,000.
“Sunshine Coast renovators might consider older-style properties at Caloundra. The new Kawana Hospital will be a major employment node, and while there is significant new housing development in the vicinity, they are further away from established cafe and retail strips,” Pressley said.
“Labrador’s demographic has changed with the improvements in transport infrastructure and major retail improvements at Helensvale and Coomera. It’s closer to the beach and [is] more affordable.”
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