The Hotspotting Top 5 City Cheapies With Prospects report has revealed the areas that are most likely to offer the best strategic property buying and investing potential over the next six months.
In selecting the “top five city cheapies with prospects”, the report considered the combined power of the following property metrics:
Hotspotting director Terry Ryder (pictured above) said affordability drove the decision-making of property consumers now more than ever.
“It’s not a coincidence that the capital cities that have remained busy and competitive recently are the cheapest ones – Perth, Adelaide, and Darwin,” Ryder said. “Equally, the cities where markets dropped the most through this period were the most expensive ones – Sydney, Canberra, and Melbourne.”
Tim Graham, Hotspotting general manager, said regional Australia had generally performed better than capital cities due to their more affordable options for all kinds of buyers.
“With technology allowing more people to work remotely, more people have opted out of the big, congested, expensive cities and moved to smaller cities and to regional areas,” Graham said. “This has been happening for the past decade and has become more visible in the past three years or so.”
“Now, following massive price growth in 2020 and 2021 in particular, some of these regional locations – such as Byron Bay, the Sunshine Coast, the Mornington Peninsula and the Southern Highlands – have become so expensive that they’re no longer attracting large numbers of new residents.”
Ryder said investors increasingly wanted to target locations where they could buy relatively cheaply, because these areas had higher yields, which could offset higher interest rates.
“The key objective is to find cheaper areas that offer above-average rental yields but also have the credentials for good capital growth,” Ryder said.
“The good news is that is achievable. There’s a myth among many real estate consumers that you can have good capital growth, or you can have high rental yields, but you can’t have both, so, you have to choose. I believe this is untrue. You can have the best of both worlds by choosing your locations intelligently.”
So, what are Hotspotting’s top five city cheapies with prospects?
City of Playford, northern suburbs of Adelaide, SA
Affordability is a key element of Adelaide’s appeal – and its City of Playford has attracted demand as the city’s cheapest precinct, generating strong price growth, Ryder said.
Not only has Playford ranked as one of the consistent performers for strong annual growth in sales values, but it had also maintained solid sales levels, with numerous suburbs classified as consistency markets.
This consistently strong sales activity, Ryder said, has impacted on prices throughout the LGA.
In the 12 months to March, every suburb in the Playford LGA posted double-digit growth in their median house prices, due to strong sales volumes in the period, “with eight suburbs each recording more than 100 house sales – including three with well over 200 transactions,” he said.
Hillbank now has the highest median house price in the Playford LGA ($535,000), after a 20% annual rise, according to Hotspotting analysis. Andrews Farm, Blakeview, Craigmore, and Munno Para West, which all posted 195 or more sales in the year to March, saw median house price growth of 15% to 23%, although median house prices in these suburbs remained affordable in the $400,000 to $450,000 range.
“Despite extensive development of new homes in the municipality, vacancy rates remain very tight, with all postcodes well below 1%,” Ryder said. “The four postcodes covering the LGA currently have vacancy rates ranging from 0.3% to 0.6%.
“With vacancies so low, rents are strong and above average yields are a big attraction for investors in the Playford LGA, with the Elizabeth suburbs in particular appealing to investors for their yields.”
City of Canning, south-eastern suburbs of Perth, WA
Graham said the upsurge in Perth’s property market had continued in 2023 – and was at its strongest since the resources investment boom that ended in 2013.
The City of Canning, in particular, experienced a busy market coupled with strong buyer demand since the start of the pandemic period, due to its “cluster of affordable suburbs with excellent amenities, green space, and train links,” he said.
According to a Hotspotting analysis, six of the nine suburbs analysed were classified as rising markets and two as consistency markets.
Suburbs that posted growing demand included Cannington (median house price $435,000) as well as Lynwood ($460,000) and Parkwood ($555,000).
“The City of Canning is notable for the affordability of most of its suburbs,” Graham said.
“Many of these locations have median house prices in the $400,000s and $500,000s, but riverfront suburbs like Rossmoyne, Shelley and Riverton are more expensive.
“Most of the City of Canning suburbs recorded moderate to strong growth in their median house prices in 2022.”
Bentley, Cannington, East Cannington, and Queens Park each recorded more than 100 annual house sales, according to Hotspotting analysis, and have median house prices ranging from $435,000 to $510,000 Bentley’s median price rose 9% in 2022 and Queens Park lifted 7%.
“The long-term capital growth rates remain modest, with the best averaging 4% to 5% per year over the past decade,” Graham said. “With the growth currently being experienced in this precinct, it’s likely these long-term rates will improve in the near future, especially with vacancy rates also remaining very low.”
“Of the six postcodes in the City of Canning, the highest vacancy rate is just 0.5%, with Lynwood and Parkwood sitting at just 0.1% and the Welshpool postcode at zero.”
City of Salisbury, northern suburbs of Adelaide, SA
In terms of sales activity and price performance, Adelaide has been one of the nation’s top markets throughout the pandemic period, Ryder said.
“The city’s strong performance has been underpinned by a state economy which has been rising up the national rankings in recent years,” he said. “Salisbury East has been identified as one of the Top 10 suburbs in Adelaide with buyer demand more than doubling in the past 18 months and house prices in the $400,000 range.”
“The suburb also has multiple schools, the Cobbler Creek Recreation Park and proximity to employment zones and major retail and commercial nodes.”
Over the 12 months to March, 70% of Greater Adelaide’s suburbs recorded a value rise. Units saw an even bigger increase, with 87% of Adelaide suburbs recording a value rise, Ryder said.
“According to the report, the top 20 suburbs for value growth in metropolitan houses over the year were all located in Adelaide’s northern suburbs, with Davoren Park seeing the strongest growth of 20.9%,” he said. “The top-five unit suburbs were also in Adelaide’s north, with Salisbury at the top – up 32.%.”
Hotspotting’s latest Price Predictor Index showed that eight suburbs in the Salisbury LGA were classified as rising markets, based on rising sales activity: Brahma Lodge, Ingle Farm, Para Hills West, Salisbury, Salisbury East, Salisbury North, Salisbury Heights, and Valley View.
This, Ryder said, has translated to continued double-digit price growth across the precinct, with Elizabeth Park seeing the greatest gains, with its median house price rising 28% in the year to February to $340,000.
Salisbury North followed closely with a 26% growth in its median house price to $390,000, while all other suburbs posted annual growth of 20% or more, except Salisbury Downs (16%) and Salisbury East (18%).
“This growth, coupled with the precinct’s sustained performance, has led to some excellent long-term growth rates, with the majority of suburbs recording 9% to 10% growth per year for the last decade,” Ryder said.
“Vacancy rates in the Salisbury LGA have also been consistently low for the past three years. All postcodes are now at or below 0.5%, making them among the tightest in the country. This is a common trend across Northern Adelaide which has an overall vacancy rate of just 0.3%.”
City of Armadale, southern suburbs, Perth, WA
The City of Armadale in Perth is now the nation’s strongest property market, according to the Autumn 2023 edition of The Price Predictor Index (PPI), with two-thirds of its suburbs maintaining high levels of sales activity in defiance of nationwide downturn pressures.
“In a trend being experienced in other major markets across the nation, many of Perth’s stand-out municipalities are at the affordable end of the market,” Graham said. “This includes the City of Armadale, which has three key strengths – affordability, strong yields, and excellent transport links.”
Several suburbs in the Armadale LGA have median house prices in the $300,000 to $400,000 range, well below Perth’s median house price.
“Of the 10 City of Armadale suburbs in the PPI report’s analysis, seven were rising or consistency markets,” Graham said. “This included Camillo with a median house price of $320,000 and the suburb of Armadale, where quarterly sales levels are now double the levels of 2021.”
Kelmscott ($370,000) is now typically selling 100 homes per quarter, up from around 60 two years earlier, according to Hotspotting analysis.
The suburb of Armadale, with the median house price of $300,000, is currently the most affordable suburb and the most popular with buyers, recording 428 house sales in the past year.
Brookdale, Camillo, Kelmscott, and Seville Grove, also have median house prices in the $300,000s, with Kelmscott and Seville Grove both selling more than 250 houses in the past year.
“Most of the City of Armadale’s remaining suburbs have median house prices in the $400,000s and $500,000s,” Graham said.
“Investors seeking strong returns can find rental yields above 6% in several of the City of Armadale suburbs. The two key postcodes in the Armadale LGA had vacancies above 5% in 2017 but they have been trending sharply downwards since then. Now both are 0.5% and below, which has put upward pressure on rents and yields.”
Inala precinct, suburban Brisbane, Qld
Inala is well placed to be a notable real estate performer thanks to its affordability and location within 20km of Brisbane’s CBD along with its strong transport links and numerous amenities and services, Ryder said.
“The precinct attracts consistent buyer demand for its affordability with houses in the $400,000 and $500,000 price range and its education, health, and shopping facilities,” he said. “The precinct’s dwelling stock includes houses on large blocks suitable for renovation.
“This established suburban precinct is surrounded by new developments – with the broader Inala precinct experiencing a multibillion-dollar evolution of new suburbs, including major master-planned communities. This is creating new infrastructure, services and job opportunities within striking distance of locals.”
Inala’s housing affordability lures a lot of young families to the area, as evidenced by the area’s high birth rate.
“Not only are Inala properties affordable but many of the suburb’s homes are three-bedroom cottages on good-sized blocks, with potential for renovation, making them appealing to young families,” Ryder said.
“Coinciding with the rise in birth rates, property prices have been steadily rising in recent years – after a temporary decline in 2018 which encouraged renters to become buyers and generally attracted first-home buyers.”
Data from various sources suggested that first-time buyers are still purchasing and renovating homes, confirming the opportunities that Inala and surrounding suburbs continue to offer, he said.
“Sales activity is also rising in the area, with CoreLogic data showing a sharp increase in sales numbers since mid-2020,” Ryder said. “Inala’s median house price is now $560,000 based on 119 sales in the year to March 2023 and following an annual 19 per cent uplift.”
Inala also has above-average yields for investors given it traditionally has low rental vacancy rates.
“The vacancy rate in postcode 4077, which is Durack, Inala, and Richlands, has never been higher than 2.8% at any time in the past two decades – and has been below two per cent since mid-2020,” Ryder said.
“The postcode’s vacancy rate is now just 0.4%, which is putting strong upward pressure on residential rents in the Inala precinct.”
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