Middle-ring suburbs in Australia’s biggest cities are regarded as the best places to buy a house as a long-term investment that will outlast property market fads.
For close to the mid-point price, it is still possible to buy a house in Sydney or Melbourne between 10km and 20km from the CBD in an established postcode.
During the past year, Sydney’s median house price has surged by 30.4 per cent to an even more unaffordable $1.361million as of November, CoreLogic data showed.
While that kind of money would buy a house in western Sydney, southern suburbs near the airport are regarded as a better investment.
Middle-ring suburbs in Australia’s biggest cities that are yet to gentrify are regarded as the best places to buy a house with a property market slowdown tipped in 2022. During the past year, Sydney’s median house prices has surged by 30.4 per cent to an even more unaffordable $1.361million as of November, CoreLogic data showed. But it is still possible to buy a house at Bexley for less than that with an auction price guide of $1.2million
Brett Warren, a director of Metropole, said Kogarah and nearby Bexley in the St George area were both only 14km from the city and close to train lines – with both postcodes outperforming the rest of Greater Sydney.
Middle distance suburb annual price rises
Greater Sydney: Up 30.4 per cent or $317,358 to $1,360,543
Bexley: Up 33 per cent or $415,885 to $1,675,053
Kogarah: Up 38.6 per cent or $519,327 to $1,864,789
Greater Melbourne: Up 19.5 per cent or $160,920 to $986,992
Mount Waverley: Up 22.8 per cent or $312,879 to $1,684,076
Source: CoreLogic data covering increases in the year to November 2021
‘The suburbs I feature are all located within the inner-middle rings of Sydney so that we can avoid any hot-spotting or speculative investing,’ he said.
‘These are all proven investment-grade suburbs.’
Mr Warren’s top 15 suburbs to invest include expensive beachside suburbs such as Coogee and Maroubra in southeast Sydney, and Neutral Bay and Cammeray on the Lower North Shore.
The gentrified inner-west postcodes of Balmain, Rozelle, Newtown, Ashfield, Marrickville, Dulwich Hill and Summer Hill made the list, along with pricey Kensington and Kingsford in Sydney’s inner south.
But Bexley is much more affordable with a three-bedroom house advertised with an auction guide of $1.2million.
That would be a bargain in a suburb where the median house price in the year to November rose by 33 per cent to $1.675million, CoreLogic data showed.
In neighbouring Kogarah, prices rose by an even steeper 38.6 per cent to $1.865million.
Both suburbs are more expensive than the rest of Sydney’s inner southwest, where the median house price stands at $1.443million, following an annual increase of 26.1 per cent.
Metropole’s top 15 suburbs for Melbourne also included upmarket postcodes, with the southeast suburbs Brighton, Sandringham, Beaumaris, Hampton, Parkdale, Mordialloc, and the adjacent suburbs of Elsternwick, Bentleigh, McKinnon, Ormond, Cheltenham, Surrey Hills and Glen Waverley dominating the list.
Brett Warren, a director of Metropole, said Kogarah and nearby Bexley in the St George area were both only 14 kilometres from the city and close to train lines. They were on a list of 15 mainly expensive suburbs regarded as a good buy
During the past year, Melbourne’s median house prices has climbed by 19.5 per cent to $986,992.
‘Unlike some of Australia’s other major cities, Melbourne’s house values were severely impacted by the state’s extended Coronavirus lockdown in 2020 and 21, so they still have quite a fit of catching up to do,’ Metropole said.
‘But while the state’s property market suffered a dip, since late October, the Melbourne market has rebounded strongly.’
For slightly more than the city’s mid-point, it is possible to buy a house at Mount Waverley, 16km east of the city, for $1million.
That is still well below the suburb’s median house price of $1.684million, following an annual increase of 22.8 per cent.
The Melbourne suburbs recommended
4. Bentleigh and East Bentleigh
10. Cheltenham and Highett
13. Surrey Hills
14. Mount Waverley
15. Box Hill
16. Glen Waverley
The Sydney suburbs recommended
5. Neutral Bay
9. Dulwich Hill
10. Summer Hill
‘Mount Waverley is another very family-friendly area where locals are mainly older couples and families, with some younger single people,’ Metropole said.
‘The area has a relaxed lifestyle with lots of parks, schools, golf courses shopping, and access to public transport.’
While bosses are allowing their staff to work from home, professionals may be required back in the office again once the pandemic is over.
This would make houses in middle-distance suburbs more appealing over the long-term.
CreditorWatch chief economist Harley Dale, who previously worked at the Housing Industry Association, said outer suburbs were more likely to see price falls as borrowers in frontline service jobs struggled to repay their mortgages.
During the past year, Melbourne’s median house prices has climbed by 19.5 per cent to $986,992. But for $1million to $1.1million, a house is available at Mount Waverley, which is much less than upmarket postcodes in the city’s south-east
Property purchases in these areas could therefore become a poor investment if a significant number of homeowners are forced to sell and add more supply to the market, bringing down prices.
‘If you take somewhere like greater western Sydney or parts of outer Melbourne, where housing developments are only as recent as 10 or 15 years’ old, you will see a divergence in people’s experience as they try to hold onto their homes,’ Dr Dale told Daily Mail Australia.
‘That’s what 2022 is going to teach us – we don’t really know yet what the shape of Australia’s economic recovery is going to be.’
The Reserve Bank of Australia’s December meeting minutes hinted it was in no rush to raise the cash rate from a record-low of 0.1 per cent.
‘The board will not increase the cash rate until actual inflation is sustainably within the two to three per cent target range,’ it said.
‘This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently.
‘This is likely to take some time and the Board is prepared to be patient.’
Nonetheless, Australia’s two biggest banks are expecting house price increases to slow in 2022 with lenders now raising their fixed mortgage rates.
Westpac, Australia’s second biggest bank, is now expecting property prices to slow in 2022 and fall further in 2023
Westpac saw Sydney property prices rising by 27 per cent in 2021 before dramatically slowing a 6 per cent in 2022, followed by a 6 per cent drop in 2023.
It forecast Melbourne real estate values increasing by 18 per cent in 2021 before slowing to 8 per cent in 2022 and falling by 6 per cent in 2023.
The Commonwealth Bank is expecting Sydney property prices to climb by 27 per cent in 2021, before slowing to 6 per cent in 2022 and plunging by 12 per cent in 2023.
Australia’s biggest home lender has forecast that Melbourne real estate values would rise by 17 per cent in 2021 before slowing to 8 per cent in 2022 and falling by 10 per cent in 2023.