Savvy home buyers and investors should look outside the square and consider the areas which have not attracted the same level of attention as traditional blue-ribbon locations. For example, some of the suburbs identified in the National Hotspot research include light industrial areas which are expected to eventually transform into residential areas with amenities
Sydney, NSW (PRWEB) September 16, 2009
St.George Bank today released its commissioned National Hotspots property report, which identifies the suburbs that currently represent the best value real estate in Australia.
The report has identified 24 property locations nationally that are likely to provide the strongest value for home buyers. Across the country, these suburbs have been chosen based on their location attributes, the value of housing in the area, the level of amenities in the suburb and the demographic mix. The locations identified should perform well and will suit both buyers looking to live in the home and investors seeking capital growth over the medium to long term.
The property hotspots chosen on a region-by-region basis are:
Sydney: Granville, Rockdale, Lidcombe, Riverwood, Waterloo
Brisbane: Keperra, Margate, Cannon Hill, Fairfield, Kedron
Melbourne: Chadstone, Ashburton, Brunswick, Flemington, Fawkner
Hobart: North Hobart
Perth: Bassendean, Thornlie
Adelaide: Thebarton, Glanville
Darwin: Rapid Creek
Regional Australia: Gulliver, Redan
The particular standout suburbs identified are: Granville (Sydney); Chadstone (Melbourne); Keperra (Brisbane); Bassendean (Perth); and Thebarton (Adelaide).
The global credit crisis is showing signs of thawing and Australia's economic prospects are improving. But economic conditions are still relatively fragile and so many people remain uncertain about where to invest their money. As a useful guide for its customers, St.George Bank commissioned rpdata.com, Australia's largest property analysis business, to undertake in-depth research to assess investment opportunities for both homeowners and property investors. To receive a free copy of the full research report register online at St.George.com.au.
Commentary on the hotspots
Besa Deda, St.George Bank's Chief Economist said the Australian property market has proved resilient compared with the share market during the economic slowdown and over the last ten years. "The share market dropped by 54 percent from its peak in late 2007 to its trough in March 2009 while dwelling values recorded a decline of just fewer than 4.0 percent from their February 2008 peak to the bottom of the market in December 2008. Since December 2008, Australian median dwelling values have rebounded and, as at the end of June, they sit at their highest ever level of $471,818. The share market has also recovered from its trough but remains more than 30 percent off its peak."
Commenting on the results Ms Deda said: "Over the 12 months to June, all mainland Australian capital city median dwelling values have risen. While Adelaide has recorded the smallest growth at just 0.6 percent, Darwin values have jumped 7.0 percent. Other capital cities have also seen median house prices increase: Melbourne (6.5 percent); Sydney (5.9 percent); Perth (1.9 percent); and Brisbane (1.4 percent)," she said.
"According to the National Hotspots research, there has also been a substantial improvement in rental yields. Currently, national gross rental yields are at 4.4 percent for houses and 5.3 percent for units. Across mainland capital cities, the strongest rental yields for houses and units are found in Darwin, sitting at 6.4 percent and 6.0 percent, respectively. The lowest rental yields are found in Melbourne, recorded at 4.2 percent for houses and 4.8 percent for units.
"The Australian property market is certainly not homogeneous and across capital cities individual performances have shown significant variations. In each city there are areas that have been overlooked by property buyers, despite positive factors that actually make these locations attractive spots for home owner-occupiers or investors," Ms Deda said.
The 24 hotspot suburbs identified include an interesting mix of older demographic areas where the majority of dwellings are owner-occupied but have great potential for renovation, and younger demographic areas where the dwellings are dominated by apartments and offer good value for money.
In addition, just about all the hotspots are in close proximity to retail amenities and restaurants, are well serviced by public transport and, most importantly, are all discounted or underperforming for their current location when compared with nearby suburbs. As a result, they are expected to perform well.
"Savvy home buyers and investors should look outside the square and consider the areas which have not attracted the same level of attention as traditional blue-ribbon locations. For example, some of the suburbs identified in the National Hotspot research include light industrial areas which are expected to eventually transform into residential areas with amenities," Ms Deda said.
Factors underpinning potential growth in residential housing markets
Low mortgage rates, the boost to the first-home-buyers' grant, improved housing affordability, rising rental yields and relatively low vacancy rates have helped underpin a recovery in lending and sales for housing. Demographic factors are also underpinning the prospects for residential housing.
"There are important demographic fundamentals that shed a favourable light on the prospects for residential housing lending and prices over the medium to long term. Population growth nationally is running at its fastest pace in 40 years at a time when there is a national shortage of housing," said Ms Deda.
In raw terms, the population in Australia grew by 406,000 persons in the year to December 2008. Although overseas migration has been cut over this financial year, it remains above historic levels and may well be supplemented by the poor economic conditions abroad resulting in fewer people leaving Australia for foreign shores. The level of natural population increase has also climbed in recent times.
Fundamentally, an increasing population fuels demand for housing. Population growth has been running at this robust pace at a time when residential construction has been weak. The current undersupply of housing throughout Australia is estimated to sit anywhere between 20,000 and 80,000 per year. With fewer dwellings being built, the supply shortage continues to be exacerbated and is anticipated to increase over the next few years as the population grows further and the required amount of dwelling commencements needed to fill this shortage goes unfulfilled.
This imbalance between demand and supply has placed a floor under dwelling values and is likely to place upward pressure on dwelling prices over the medium to long term.
Overall, national demographics then are encouraging and favourable for a housing upswing in the medium term, particularly when combined with the current low interest rate environment.
Over the long term, consumer confidence levels have influenced housing sales volumes. This influence is not surprising given that the cost of the commitment to purchase property takes a level of confidence in the market. The Melbourne Institute-Westpac measure of consumer sentiment has risen in the last four consecutive months. It now sits well above the 100-point level that shows there are more consumers optimistic than pessimistic about the economic outlook.
Home Lending Up
Life was breathed into residential lending by significant cuts to interest rates and the government's first home buyers' boost. Housing finance commitments have witnessed a strong recovery, mainly in the owner-occupier segment. "The number of loans extended to owner occupiers has risen in nine of the last ten months and stood 25.7 percent higher than a year ago in July. The value of all loans retreated in June and July, but it follows six consecutive months of increases and annual growth remains buoyant at 24.3 percent," said Ms Deda.
The recovery was initially driven by first home buyers and by households taking out a loan as an owner-occupier. But in recent months, upgrader demand has lifted. However, the value of loans for investment housing appears to be retreating again after recovering earlier in the year.
Rising unemployment is one of the risks to the housing market recovery. So far the unemployment rate has not climbed to the levels feared earlier this year and last year. Indeed, since the global credit crisis began, there has been net job creation in Australia.
"Greater labour market flexibility has meant employers have responded to softer economic conditions by reducing the hours worked by staff wherever possible rather than making lay offs. Further, in comparison to previous downturns, there are more dual income households and many home owners have enjoyed a build up in property values in their homes in recent years," Ms Deda concluded.
While such material is published with permission from rpdata.com, St.George Bank Limited accepts no responsibility for its accuracy or completeness. We recommend you seek independent advice before making a decision based on this information.