Over the past couple of years, prime suburbs across Australia grew the fastest and properties in the lower end languished. However, the last six months have shown a shifting trend: prices in the top end suburbs have started to stagnate with some seeing some dramatic falls in the median price, while the properties in the lower end are starting to attract buyers' interest.
As a result, experts are now advising investors to look where the first homebuyers are going, because that’s the place to be in 2009. It's not the posh beachside houses, or the inner suburban luxury homes geared to the business professionals. It's the outer suburbs that are hot and ready to move the highest percentage upwards in value, particularly those suburbs where prices are affordable while city commutes still reasonable.
Why first homebuyers? Firstly, they've got the government incentives: greatly reduced stamp duties in most states and a First Home Owner Grant that's been doubled or even tripled in some cases.
There are also the lowered interest rates, another growing incentive to buy. Then mixed in with all of that is also a pent-up demand.
"With all those incentives, it's all stacking up in favour of the first homebuyer and the lower segment of the marketplace, says Tim Lawless, research director at RP Data.
And once a particular area starts to pick up in sales volume, expect the prices to rise as well.
"The old adage is once you've got more buyer activity in the market, that puts upward pressure on the prices," says Lawless.
Outer vs inner suburbs
In all those outer suburban ranges, there's also quite a bit of risk. Not all outer suburbs are set to boom. Investors need to look hard at infrastructure and demand in a particular place before considering a purchase.
"I think the emphasis from now and well into 2009 will be on affordable areas, particularly capital city suburbs with public transport connections," says Terry Ryder, a property expert from hotspotting.com.au
Ryder says it was a myth that inner suburbs around capital cities were the best investments.
"The fact is, that in any capital city, the expensive inner suburbs are poor long-term performers in terms of capital growth,” says Ryder. "Above all, their price patterns are volatile rollercoaster rides that can produce sharp declines, contrary to popular claims they always hold their value."
Ryder says, looking into 2009, some investors will still favour the consistent demand in and around the cities. However, those looking to find the best deal with higher upside will search into the further-out suburbs.
"The myth is actually good news for those investors that can see past the hype,” says 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."
In many of the suburbs featured on the following pages, based on picks from various real estate experts, median prices hover around or under $300,000.
There are others, such as Darwin, inner city Sydney and Carlton that don’t fit the suburban focus or lower price range, though.
That's because there are no general rules that can ever be blindly followed when investing in property. There are always exceptions, even in the individual suburbs themselves.
Top areas to watch in 2009
1. Beenleigh and Eagleby, Qld
• Low entry price
• Transport infrastructure
• Job growth
Beenleigh is a prime example of where demand should be high in 2009, as many first homebuyers will be attracted by the affordability.
Along with nearby suburbs such as Eagleby and Mount Warren Park, the Beenleigh area is one of South East Queensland’s best property bargain loactions, according to RP Data. While the area isn’t attractive to everyone, it has the price as well as infrastructure to draw many to the area for their first home.
"The area has everything, including a direct rail service to Brisbane and the Gold Coast, and connection to the Yatala industrial area via shuttle bus," says Geoff Kerkow of PRDnationwide in Eagleby.
Transport infrastructure servicing the area also includes the M1 Motorway.
Beenleigh is also set for a spend of $90m in retail shops with the planned construction of a new outlet shopping centre. In all, there'll be about 70 shops. It could open by March this year.
2. Carlton, Vic
• Tram stops to city
• Wide price range
• Strong demand
There's no secret about Carlton being one of the more popular Melbourne suburbs. RP Data projects that popularity to continue to grow even stronger in 2009.
Located just north of the Melbourne CBD and positioned on the tram line, Carlton’s draw card is its social precincts. RP Data says more than 75% of the housing stock is units.
Despite Carlton's popularity as a social destination, the unit market still provides exceptional value for the money. The median price for a unit in August was $320,000. That compares to $495,000 in nearby Collingwood, $387,000 in North Melbourne and $352,000 in Brunswick.
Other strong drivers of the rental market in Carlton include demand from students at the University of Melbourne and Royal Melbourne Institute of Technology. There is also the Royal Women’s Hospital in the area.
The range of unit stock provides a price point for buyers of all kinds. RP Data numbers show 45% of all unit sales during the first half of 2008 were for less than $250,000, while at the upper end there have been 10 unit sales over $1m since 2006.
3. Ceduna, SA
• Healthy economy
• Mining connections
Ceduna is a remote regional centre in the west of South Australia. The home values are low, but there’s reason to believe they could be on their way up in 2009. Ryder says typical houses cost under $200,000.
"It has a healthy economy based on aquaculture, agriculture, tourism and resources," he explains.
"The town's prospects are boosted by a number of new mining ventures which will use Ceduna as their base and as their export port."
Ceduna is set on Murat Bay, just under 800km northwest of Adelaide. Recent improvements to infrastructure include a $36m renovation of Ceduna Hospital. The area is also popular with some tourists, who are drawn by such events as the annual oyster festival.
To the north is the vast Yellabinna Recreation Reserve.
4. Coolangatta, Qld/Tweed Heads, NSW
• Renowned beaches
• Improved road infrastructure
• Strong demand
Tim Lawless of RP Data says units in Coolangatta and Tweed Heads, its twin town just over the border in NSW, provide good value compared to suburbs further north on Queensland’s Gold Coast. The recent opening of the Tugun bypass has improved traffic conditions.
"New development and increased investment activity will continue to push prices upwards in this strategic and affordable area of the Gold Coast that is also renowned for its surf beaches," says Lawless.
5. Dapto, NSW
• Tight rental market
• Population growth
• Improving infrastructure
Another first homebuyer-based growth area could be Dapto, in Wollongong, in 2009. Many can enter the Dapto house market for as low as $210,000, says PRDnationwide sales coordinator Nardia Guillaumier. PRDnationwide places Dapto and Horsley as the highest selling suburbs in the Wollongong region.
"This is great news for the first homebuyer," says Guillaumier. "If the trends continue, buyers will be receiving strong growth soon after their purchase."
Rents are also up in the area by double digit percentages, Guillaumier says.
The growing demand is set to continue well past 2009, she adds. In June 2007, the population for the Wollongong area was projected to grow from 195,768 to 223,740 in 25 years, says Guillaumier.
There are already plans for an extensive land release on the outskirts of Dapto, which could make Dapto one of Wollongong’s largest suburbs.
6. Darwin, NT
• Rental yield
• High demand
• Resource jobs
While some experts have predicted Darwin's value growth has reached its peak in 2008, others, such as those at RP Data and Collier’s International, still see the potential for more.
Darwin has the best rental yield for houses in Australia, while remaining the second most affordable in median price on the mainland behind Adelaide.
The high rental returns are being fuelled by strong demand from the military presence in Darwin, as well as from the resource sector.
RP Data predicts that demand will remain strong in 2009.
"Those houses situated closer to Darwin or within the northwestern suburbs fronting the Timor Sea are likely to be met with the greatest demand and have the best opportunities for capital growth," says RP Data.
7. Geraldton, WA
• Projected job growth
• Broad-based economy
A port city about 420km north of Perth, Geraldton remains one of the more affordable options in the resource-boosted Western Australia market. It has the fifth largest population in the state, and is still showing signs of growth.
"While mining towns like Port Hedland, Newman and Karratha have very expensive houses, Geraldton has houses in the $300,000s," says Ryder.
Unlike many of those other mining towns in the state, Geraldton also has a diversified economy.
"It's not totally dependant on mining, but has strong fishing, agriculture and tourism sectors," says Ryder.
"And it will be greatly boosted by the $3bn Oakajee Port."
The iron ore port and rail project in Oakajee will be 25km north of Geraldton and could open as early as 2012, according to the state government. It's a joint venture between Murchison Metals and the Japanese Mitsubishi Corporation. Thousands of jobs will be created both in the short term in construction, and in the longer term with the iron ore.
8. Halifax, Qld
• Great Barrier Reef location
• Affordable sea change
• Good potential
Many properties in Halifax sit right on the ocean, looking out onto the Great Barrier Reef. Halifax is situated close to Ingham in northern Queensland, and Hinchinbrook Island is nearby.
"The area holds significant sea-change appeal, especially given many sea changers have been priced out of the southern Queensland sea-change markets and population growth in some of those areas has diminished the appeal," says RP Data in its report.
The median price had hit a high of $200,000 in August. Despite its small list of properties, RP Data lists Halifax for a potential hot spot in 2009.
9. Ipswich corridor, Qld
• Major growth region
• Improving transport links
This precinct southwest of Brisbane should continue to be a major growth area into 2009 and beyond, says Ryder.
"Homes are still affordable, jobs are being created in the area, it has rail links to central Brisbane and the much needed upgrade of the Ipswich Motorway is underway," he says.
Ryder notes the corridor has been designated by the Queensland state government as the major growth This precinct southwest of Brisbane should continue to be a major growth area into 2009 and beyond, says Ryder.
“Homes are still affordable, jobs are being created in the area, it has rail links to central Brisbane and the much needed upgrade of the Ipswich Motorway is underway," he says.
Ryder notes the corridor has been designated by the Queensland state government as the major growth precinct to absorb South East Queensland’s population increases over the next 20 years.
Some performing suburbs in 2008 for the corridor include Blackbutt North, Dinmore, Carole Park and Goodna, all with 12-month growth in September 2008 at above 30%, according to RP Data.
10. Kelvin Grove, Qld
• High rental demand
• Urban renewal
• Good infrastructure
In both houses and units, Kelvin Grove is more affordable than neighbouring inner Brisbane suburbs of Red Hill and Paddington.
It's just 4km from the Brisbane CBD, but is residential in appearance with tree-lined streets. Boosting the rental demand is a campus of the Queensland University of Technology, and the Royal Brisbane Hospital. The suburb hosts the La Boite Theatre.
The area is in line for some urban renewal, which Ryder says will pave the way for further real estate growth. More apartments are being constructed in the area, rising above the shops, cafes and university campus.
The Northern Link Tunnel, which will be 4.7km long and burrow under Red Hill and Paddington on the way to Toowong, will increase attraction.
"It will be further boosted when the Northern Link Tunnel is built," says Ryder.
11. Latrobe Valley, Vic
• Growing employment
• Good rail links
Known as the electricity generation capital of Victoria, Latrobe Valley is set for some major development projects, which will be coming soon.
"Many are $1bn-plus projects which will create thousands of jobs and demand for accommodation in towns like Traralgon, Moe and Morwell, where homes are currently affordable," says Ryder.
The electric reputation of Latrobe Valley is due to its production of massive amounts of coal. However, Ryder says most of the new projects are for clean energy. Traralgon, Moe and Morwell are the three major towns in the valley, and there are also many other smaller ones.
One of the upcoming projects expected to be undertaken is the $750m power station planned by HRL and China's Harbin Power, touted as utilising clean coal.
On top of having jobs and affordability, Latrobe Valley has rail links to Melbourne and Gippsland, says Ryder.
There are also road links, which have been much improved as a result of the recently completed Pakenham Bypass and EastLink tollway.
12. Lefevre Peninsula, SA
• Proximity to waterfront
• Quality transport
There's significant investment potential in Adelaide's Lefevre Peninsula, according to Lawless. Solid transport amenities make the area popular with commuters who head 15km southeast to the Adelaide CBD.
"The area still has a large amount of industry, so buyers do need to be strategic when selecting a suburb in which to invest in," says Lawless. "However, redevelopment within the region such as Newport Quays at Port Adelaide should dramatically boost the appeal of the local area."
Suburbs such as Ethelton, Exeter, Largs North, North Haven and Semaphore Park all have median house prices below those in Adelaide, says Lawless.
That has had many property investors pointing to this peninsula as one of the better bets in 2009. Another draw is that the peninsula’s western coastline has an 8km stretch of beaches with white sand.
13. Leumeah, NSW
• Transport infrastructure
• Nearby schools
Like much of western and southwestern Sydney, Leumeah has felt the slump in demand in 2008. However, new incentives for first homebuyers should turn that around in 2009. RP Data lists it as one of the most affordable suburbs in the region.
"The South Western Freeway is within close proximity to the suburb and Leumeah has its own train station, which is becoming increasingly important,” says Lawless. “For these reasons, it’s felt the suburb has strong price growth fundamentals moving forward."
Leumeah is about 50km from the Sydney CBD. It’s home to Campbelltown Stadium, and soon will have a six-level family-friendly entertainment centre. The Panjo Destination Centre 4 Children will include a child-care centre, aquatic centre, ice-skating rink, day spa, themed restaurants and a performing arts college.
14. Minto, NSW
• Transport to city
• Magnificent views
Similar in property value statistics to Leumeah is Minto, which also has a high upside for 2009.
One highlight recently in Minto has been the One Minto development, says Rob Sullivan, Landcom’s general manager for corporate marketing.
The suburb was once solely a public housing estate, but One Minto has renovated the entire area, opening the majority of its stock to the public in September 2008.
Of the 1,150 residential lots, 800 are private houses. The development offers a majority of its new homes at around $350,000. The top of the estate offers unobstructed views of the nearby Campbelltown Hills, says Sullivan.
Minto has rail access to Sydney, and there's growing employment with both large commercial and industrial employers.
"It's a terrific opportunity for first homebuyers," says Sullivan.
15. Normanville, SA
• Sea change
• Close to Adelaide
A small oceanfront town at the mouth of the Bungala River, Normanville appeals to sea changers.
It's still a very rural and quiet town, which has an attraction for certain buyers.
It's located on the Fleurieu Peninsula, about 64km southwest from Adelaide, which makes regular commuting by residents possible.
"The waterfront location adds significant appeal, as does the relative proximity to Adelaide," says Lawless. "For these reasons, it's felt that the area is ripe for ongoing median house price growth."
While much of the housing stock has remained the same for years, RP Data reports a number of new homes have been built recently in Normanville.
16. Port Hughes, SA
• Sea change, tourism
• New golf course
A small town along the Copper Coast, Port Hughes is set for some price growth in 2009, according to RP Data.
It's already a popular sea-change and tourist location, one of its features being its beaches. The development of the first Greg Norman-designed golf course in Australia and more prestigious housing stock on the way should start further boosting prices in the area.
The $250m golf course development, which is called 'The Dunes', also includes residential construction of some 1,650 units.
17. Redcliffe Peninsula, Qld
• Wide range of stock
• Transport improvement
Of the commuting areas around Brisbane, Redcliffe Peninsula offers one of the more affordable options.
The amenities are also a drawcard, which makes this a solid investment pick, looking forward.
"The sheltered beaches are usable for swimming, fishing and boating, while the foreshore is dotted with parks," says RP Data in its report.
"The coastal strip, which runs along most of the eastern length of the peninsula, has a burgeoning cafe and restaurant scene, which is becoming increasingly popular as a destination."
Lane duplication on the Houghton Highway Bridge will cut down Brisbane travel time on the Gateway Motorway.
18. Robina and Varsity Lakes, Qld
• Rapid population growth
• Strong infrastructure planning
• Expanding commercial precinct
From population growth to impressive amenities, the Robina and Varsity Lakes region in the Gold Coast has all the pieces investors look for. PRDnationwide principal Rob Glover says this stems from solid planning in the area from the late 1970s onwards.
"Robina and Varsity Lakes are considered to be a very good example of effective town planning practice that has evolved into a true people place," says Glover.
He says the area's population grew 3.4% from 2006 to 2007. Public and private initiatives are projected to create about an additional 30,000 jobs over the next two decades, adds Glover.
The area is about 10km from Surfer's Paradise and 80km from Brisbane.
It hosts the Robina Town Centre for shopping and the $160m Skilled Park which is home to the Gold Coast Titans rugby team. Bond University is nearby.
There's a train station in Robina, and a further 4km of trainline currently under construction will connect to a new station in Varsity Lakes.
19. Ryde, NSW
• Business growth
• Transport link
• Rising rents
Some major infrastructure development is coming to the Ryde area, set to increase growth even further into 2009.
Pino Tedesco, the Sydney office director of Metropole Property Investment Strategists, says he's seen much of North Ryde transform from bushland to business centres.
North Ryde has been tagged the 'Silicone Valley' of Australia with all the major corporations set to come.
"All these new commercial buildings are coming up," Tedesco says. "And the workers are going to want to live close by."
He says the transport links also make Ryde a solid investment.
"Ryde is the centre of the universe when it comes to Sydney," Tedesco says.
The Epping to Chatswood rail link is set to open in February 2009, and has a stop in North Ryde and one in nearby Macquarie Park.
20. Spring Hill, Qld
• Urban renewal
• Rental yield
Bordering the north of Brisbane CBD, Spring Hill remains a more affordable entry point for investors in the inner city area of Brisbane.
"The area could best be described as being dominated by older unit stock as the CBD has seen a large injection of new stock, as have many inner city locations which have seen significant urban renewal," says RP Data's report for 2009.
The suburb is home to Shafston College and has a humming nightlife, but the proximity to the CBD is one of the main reasons RP Data sees rental yields improving through 2009. There’s a shortage of rental stock in the inner city.
"These fundamentals suggest that Spring Hill represents significant value, and the area is poised for price growth and improvements for rental returns," says Lawless.
21. St Clair, NSW
• Community amenities
• Rail link
Located in Sydney's west, St Clair typifies the suburbs further out from the city that are worth investing in – affordable prices but still with good infrastructure and job growth.
"Housing is affordable, there are good community amenities, there are plenty of jobs being created in the area and it has rail links to central Sydney," says Ryder.
The precinct is located at the intersection of the M4 and M7 motorways, giving commuters a path into the city or further west to the Blue Mountains – visible from many St Clair streets – or out to Liverpool and south to Campbelltown or Canberra.
The area has a wide range of quality schools, making it attractive for families.
There's also a growing business presence. A $20m food production facility was approved in October 2008 for Erskine Park, expected to create 270 jobs. Other business developments are expected to come nearby soon after, with a target of 36,000 new jobs.
22. Sydney (inner city), NSW
• Low vacancy
• Rising demand
• Wide range of entry prices
Vacancies are hovering around 1% in Sydney. While much of the growth in value lately has been slow, there are many suburbs in the inner city itself that performed exceptionally well, in both rental yield and value growth.
RP Data has highlighted Haymarket, The Rocks and Surry Hills as suburbs moving towards 7% for gross rental yields. Those with the means to afford the median unit price in The Rocks of nearly $700,000 could see an average gross rental yield of 8.4% in the spring, according to an October RP Data report.
Ryder specifies a more affordable option – Chippendale. He says it has become popular with young professionals despite its 'daggy' image of the past.
"It's evolving into a trendy location, a process that will be boosted by the $1bn redevelopment of the CUB [Carlton United Breweries] site."
RP Data's report says rental rates in the inner city suburbs of Sydney will likely increase by at least 10% over the coming year.
23. Thuringowa, Qld
• Population growth
• Diversified economy
Recently absorbed under the Townsville Local Government Area, Thuringowa is experiencing the strongest population growth in the area, according to RP Data.
Thuringowa's population has more than doubled in 20 years, and nearly quadrupled in the past 30 years. One of the reasons it's outpacing some of its neighbouring suburbs is its affordability. There are many million-dollar homes in coastal suburbs like Saunders Bay, whereas the median price in Thuringowa Central remains in the mid-$300,000s.
"The combined region of Townsville and Thuringowa has arguably the most diversified regional economy in Australia, which should continue to underpin population growth which will in turn create ongoing demand for housing in the region," says Lawless.
24. Tully, Qld
• Proximity to beach and rainforest
• Sea change
Tully has seen a whopping 205.95% median value growth in five years, according to RP Data. Yet it's still one of the more affordable buys in the area, with a median price of $269,000 in September 2008.
Located about 175km northwest of Townsville and 114km south of Cairns with access from the Bruce Highway, Tully is 20km from the popular tourist area of Mission Beach. It has a train station along the North Coast Railway line.
It has one of the highest annual rainfalls in all of Australia, but its coastal location is a major draw that should grow in interest in 2009, according to RP Data.
"The current median price is extremely affordable, and the township's appeal stems from its ability to give a sea-change and tree-change offering all in one suggests that the area should see significant growth," says Lawless.
25. Tumbarumba, NSW
• Strong employment
• Small town with amenities
Investors looking to start low in price can find some good options in Tumbarumba. The town of just above 2,000 people has all the amenities – two primary schools, a high school, all necessary medical care, aged care, shops and supermarkets.
Founded as a gold mining town in the 1850s, Tumbarumba now has solid employment numbers from the logging, farming and horticulture industries, to name a few. Located 500km from Sydney, it’s far from big-city life.
"We're not part of a big metropolis down here in Tumbarumba, but we certainly offer a great lifestyle at an affordable price," says Julie Giddings of PRDnationwide. "For investors, we have numerous properties for sale currently showing good returns."
She gave as an example a three-bedroom home listed for sale at $150,000, or town blocks from $22,000.
The area features stunning views along Paddy's River and Mount Kosciuszko can be seen in the distance.
26. West Perth, WA
• Lower grade opportunity
• Improving yields
West Perth units have a median value just over one-third of houses in the suburb ($765,000 in September). A negative growth in 2008 for units in West Perth shouldn’t discourage investors in 2009, however, says RP Data.
"It's our belief that there's significant opportunity for lower grade, more affordable investment product within Perth's inner city," says Lawless.
RP Data compares the opportunity in West Perth to Newstead and West End in Brisbane, Pyrmont in Sydney, and Docklands and Southbank in Melbourne.
"New product would help boost prices of existing product and revitalise the area," says Lawless.
West Perth has a significant elevation, providing some properties with exceptional views. There’s also an abundance of retail and dining.