Why investors should look beyond property hotspots

23rd Oct 2017By: Charles Tarbey

Sydney has long been considered one of the jewels in the Australian real estate crown and has continued to attract attention for its rising property prices and bullish market conditions. However, according to CoreLogic’s September Home Value Index, it appears Sydney’s reign as a growth leader may be losing steam.

CoreLogic reports that the September quarter saw Sydney dwelling values edge 0.2% higher and values slip 0.1% lower over the month. This is the markets first month-on-month decline after 17 months of consistent capital gains.

Melbourne is another market that has attracted considerable attention yet is also beginning to show signs of slowing. Melbourne dwelling values increased 0.9% over September, and CoreLogic has noted issues related to off the plan unit sales in certain parts of the market.

I believe this shows it may now be time for investors to shift their focus away from the ‘hotspots’, and consider looking towards markets that may not have benefitted from the same capital growth experienced by markets such as Sydney and Melbourne.

Investors may consider markets that are less talked about, such as areas that have long been suffering or that have experienced very little growth at all.

For example, Perth is a market where some have been struggling to complete their transactions, however it is also a market that investors may benefit from taking a close look at. Parts of the WA market appear to have gotten close to, if not reached, rock bottom in the property cycle and in some cases, prices are lower than what they were pre-boom.

Brisbane has had relatively little growth in a decade, particularly when compared to Sydney and Melbourne. CoreLogic’s September Home Value Index shows a 2.9% increase in dwelling values over the year. Despite this, the market offers many appealing qualities such as lifestyle, accessibility and a well-established owner-occupier base compared to other coastal areas.

There are two key advantages that arise from markets that are not ‘hotspots’ and that may benefit first home buyers and investors alike.

Firstly, they may allow a less frenzied approach to be taken when contemplating a property transaction. Buyers may encounter opportunities without the pressure of a boom, and can weigh up a transaction with less pressure to rush in and purchase.

Secondly, they may be faced with more room for steadier capital growth prospects. A struggling real estate market may initially be approached with hesitation by some, but I remind Australians that real estate is best approached as a long-term investment. Investors may be able to enter the market and purchase property at a more achievable price compared to boom markets, and may achieve better growth prospects by holding the property and riding the real estate cycle.

Regional markets are also proving to hold good prospects beyond the capital city hotspots. CoreLogic recently reported that the Illawarra region of New South Wales was once again the top performing regional market for the June 2017 quarter. The region recorded the largest annual increase in home values, up 15.8% for houses and 14.4% for units.

Other areas such as the Sunshine Coast, regional Melbourne, Canberra and the south coast of Sydney are areas that were picked by Century 21 to hold good growth prospects over a year ago and have proven to be very dynamic markets. It is likely the halo effect may continue to propel growth in these areas so they may be worth keeping an eye on.

However, regardless of what people are talking about and whether a market is considered a property hotspot, what remains the same is the necessity for extensive research, due diligence and professional advice. This will help you better weigh up your property goals and ensure any decision to invest in real estate over the coming months suits your own personal circumstances.