A lot has happened in Australia’s property market over the past 12 months.

 

After the once-in-a-generation boom in 2020- 21, affordability issues caused by rising interest rates and tightened lending criteria put pressure on prices during 2022.

But commencing February 2023 our housing markets moved to the next phase in the property cycle - the recovery phase.

And while prices had cooled from their previous peaks, it’s clear that buyers were still paying a premium to be close to each of our major city centres.

New data from Domain reveals the suburbs within 15km of each city leading the recovery, with median prices skyrocketing as much as 52.9% over the past year.

Interestingly, while some of the recovery-leading suburbs are affluent ones, not every growth suburb is a “blue chip.”

There are also pockets near city centres where the median house and unit prices can still be considered, even after strong growth.

Interestingly, the strongest growth suburb within 15km of Adelaide’s CBD is also the most affordable on the list.

Glenelg North in Adelaide Metro South has seen an enormous 52.9% increase in its median unit price to $535,000 over the past 12 months, and 72.6% over the past 5 years - demand for units in this suburb is mostly driven by affordability and proximity to the CBD.

House price increases also feature strongly on the list.

Kurralta Park saw the strongest increase in its median house price - of 27.3% to $750,000 - while houses in Somerton Park are the most expensive on the list thanks to its 23.4% increase to a new $1.42 million median.

What is driving price growth in these top-performing suburbs?

Essentially, the bulk of strong property price growth across all these suburbs listed is down to tight supply and strong demand.

Constraints of good quality property in sought-after locations near CBDs, the water, and other amenities had driven prices sharply higher in these areas.\

Another significant factor is the continuous growth of the population and the scarcity of land in these inner-city areas.

Due to limited available land for housing development in close proximity to CBDs, the prices of homes in surrounding suburbs have skyrocketed, making them unaffordable for a significant portion of the Australian population.

Consequently, a substantial number of individuals have chosen to relocate to regional areas and smaller capital cities, which has stimulated robust price growth in these regions.

These trends, which were already underway for some time, experienced a massive acceleration during the pandemic as remote work became more normalised.

How to find an investment-grade suburb in a top-performing suburbs list.

It’s interesting, but you will be able to identify these suburbs as they make the same list every second or third year.

They always seem to be powering ahead for two reasons – supply and demand.

Supply means there is less availability of land and therefore properties are in short supply.
Demand comes from a number of factors, including demand for aspiration suburbs, being close to employment hubs, gentrifying suburbs, high wage growth of people living in the suburb, local amenities, access to public transport, and strong school catchment prospects.

Demand does not wane for these types of locations, and they are not building any more of them.

Also check to see that the local economy is providing new jobs, is growing and there is local infrastructure spending as these are good indicators of the local area and its future.

When it comes to property investment, you should think long-term, and you should focus on investment-grade properties in A-grade locations.

Never follow a trend or buy in hotspots or growth areas because these won’t give you the long-term growth that you’re looking for.

We’re talking about areas and properties which hold their value over the long term, rather than benefit from an uptick in demand.