Another compelling year in Australian real estate is behind us, so what do we take out of it?
In our just released 2017 McGrath Report, we look at the movements in the market and pinpoint the trends that seem to be having the greatest impact on us both now and into the future.
The last few years have been a fascinating time for Australian residential property, with a number of trends emerging and driving different markets in different ways.
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Over the next couple of months, I will discuss these trends in greater depth, including why we’re staying in our homes longer, the rise in off-market prestige sales and how technology will continue to change the way we transact real estate.
Today, I provide a general market overview and my Top 5 Suburb Picks for each east coast capital city. These are the areas we feel have the greatest potential for price growth moving forward.
So, taking a macro view of Australia first of all, it’s clear that Sydney and Melbourne have decoupled from the rest of the country but this is a phenomenon this neither concerns nor surprises me.
If you follow the trends of most countries around the globe, the largest city or cities often become separated from the rest of the market by the weight of demand. And within these cities we continue to see an increasing ‘Manhattan Effect’, where lifestyle and locating as close as possible to the proverbial action has become a sub-trend.
As commuting becomes increasingly challenging, the desire to be close to the business and arts districts is a direction that’s here to stay. As a result of this, people ask me if I think Sydney and Melbourne are overvalued off the recent cycle uplift. But my honest view is that Sydney and Melbourne are the “New York’s of Australia” and will be in huge demand as far into the distance as I can possibly see.
In fact, with several billion people on the doorstep of this lucky country, many with a huge appetite to enjoy the lifestyle we have, it would be far easier to mount a sensible argument that both of the big cities will look incredibly cheap as we look back in a decade or so. That is assuming we manage our growth well and find a way to sensibly welcome immigrants and overseas investors into the country.
Which brings me to what I believe is one of the most short-sighted initiatives I’ve seen in my 35 years in real estate. The decision by three east coast state governments to impose hefty taxes on overseas buyers seems one of the strangest I’ve seen.
This tax could only have been imposed for one of several flawed reasons. Was it to allow local buyers to get into the market? Or was it simply to raise more revenue?
Let me emphasise the overall percentage of property in Australia sold to foreign buyers is minimal. The reason Sydney and Melbourne prices have risen has little, if anything, to do with overseas buyers. It’s a supply issue. And let’s not forget that we all came from somewhere else. Our multi-cultural society is one of our greatest assets. Why send a message to the world that they’re not welcome to invest alongside us in this great country?
Drilling down to street level market trends in the east coast’s major cities, there are several suburbs in each city that I believe offer greater promise for capital growth than their peers. Here are my Top 5 Suburb Picks based on current opportunity and long term prospects for price growth.
Once an average suburban precinct best known for its equine interests, Canterbury is fast becoming an Inner West bolthole attracting young families and professionals alike. Buy, sit and watch your asset grow in value.
We still can’t work out why property values here are materially below similar suburbs in the East and North. This attractive garden enclave is private and discreet with beautiful homes and perfumed gardens. If you want to see some of the best homes in the country, check out Hunters Hill.
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Follow the money. At the minute, it’s all heading to the North West ahead of the soon-to-be-completed new rail line. The surrounding areas are equally as attractive for both lifestyle and capital growth but the Rouse Hill Town Centre is worth seeing for that address alone.
Sans Souci/Dolls Point
Surrounded by water and with all the appeal and benefits of Sydney’s southern suburbs yet only minutes to the Bay, Airport and CBD, this area will continue to be one of the most desirable in Sydney.
This has been a favourite suburb for several years now. If you crossed the leafy North Shore with the vibrant Northern Beaches, Forestville would be the outcome. Relatively easy access to the CBD, just 7 minutes to the surf and surrounded by trees, it is ideal for homemakers.
A hidden gem neighbouring Prahran, Windsor was once considered the grungy end of Chapel Street but now the hipster crowd is moving in. We see great potential for this trendy pocket, which has easy access to trains and shops and is conveniently close to the CBD.
Change is on its way with a noticeable uplift in buyer demand over the past 12-18 months. This suburb is full of mid-century homes on big blocks with plenty of potential for knockdown/re-builds and development. Downsizers are capitalising on a 10-15% jump in land values over the past few years and selling to young families and developers.
Just 6km north of the CBD, Northcote has undergone major change and is now a destination suburb for young professionals and families. High Street village offers many restaurants and the tram runs straight through to the city with a train station also close by. Local schools including Northcote High and Santa Maria College are increasingly popular.
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Wheelers Hill has a median house price that is $250,000 less than its neighbours of Glen Waverley and Mount Waverley, yet it is only 5-10 minutes away. Buyers are increasingly looking for better value here and we anticipate solid price growth as a result.
This inner city precinct less than 3km from Melbourne’s CBD has been through significant gentrification over the past decade. With an abundance of leisure and lifestyle amenities, it also has cycling and running routes along the Yarra River. Young professionals and families enjoy its walkability and accessibility, while cashed up downsizers are now discovering this gem.
BRISBANE & SURROUNDS
Brisbane’s smallest suburb, Gordon Park offers fantastic value and great infrastructure. Access to the CBD has become much easier with the Clem7 and Inner City Bypass. New cafes are popping up and a ripple effect is occurring from the more established and pricier neighbouring suburbs of Grange and Wilston.
Situated next to St Lucia and Indooroopilly, Taringa has access to all the same amenities as its blue chip neighbours but offers better value for buyers. According to CoreLogic RP Data, Taringa house prices rose 10.2% in FY2016 but we think there is more growth to come.
This suburb offers very good value and a mix of waterfront and non-waterfront homes. We are seeing at least 4-5 registered bidders across all auctions in this suburb. This is an ideal location for second home buyers who don’t have the budget for Mermaid Beach. A lot of buyers are renovating so the suburb is undergoing a facelift.
With a median house price of $675,000, it offers better value than neighbouring Sunshine Beach (median $1,015,000) but probably not for long! Just a few minutes outside Noosa, Sunrise Beach has had a noticeable kick in activity and 12.5% house price growth in FY2016.
This is a town on the move with its CBD undergoing a complete makeover. Just 2km from the ocean, there is already a fresh, exciting new vibe on the main street with lots of new roads, retail, commercial spaces and community facilities on the way.
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Underrated and primed for growth, Canberra’s largest suburb with 6,140 homes offers better value than Woden and Weston Creek and a diverse range of properties. Centrally located, it is the most northern suburb of Tuggeranong with good access to arterial roads for the CBD commute.
Big money is being spent in Curtin, which has undergone a changing of the guard over the past few years. Ex-Government housing has been sold off, knocked down and re-built and family buyers priced out of Deakin, Hughes and Garran have bought and renovated.
Adjoining Turner where houses are in very short supply, O’Connor offers great value. However strong buyer demand has made it Canberra’s No 1 suburb for growth in FY2016, with house prices rising 21.5% to a median of $960,000 and apartment/townhouse values up 15.3% to $490,000.
Sitting on opposite sides of Flemington Road, the main arterial road leading out of Gungahlin to the city, these two suburbs will directly benefit from the new light rail. Both are family-oriented neighbourhoods with good schools and close proximity to the CBD.
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These two suburbs are well positioned to benefit from Belconnen’s gentrification. A lot of new townhouses and apartments are being built in the area, creating residential precincts with great amenities including shops, restaurants and cinemas.