How to find a property hotspot

With interest rates dominating the headlines, it's more important than ever to listen to the experts. Here's where three leading pundits tip as some hot investment locations in the eastern capitals for 2008.

Sydney
In Sydney, it is hard to go past areas such as Bondi Beach and its neighbours North Bondi and Tamarama for lifestyle and potential for capital growth, advises Ron Bauer, a principal with Ray White Limited.

Mr Bauer, said buyers chasing a beachside lifestyle were fuelling postcodes in the eastern suburbs near the water.¹

"[Buyers] want to be near the beach and the buzz. The financial markets have done well and it's generally the young traders who have the incomes who can spend the money," he said.

Melbourne
Valuation firm Herron Todd White advises buyers to look to areas surrounding the soon-to-be-completed Eastlink tollway in Melbourne's east and south-east, saying there could be substantial benefits for suburbs in proximity to the tollway.²

"We could see considerable increase in demand and capital values in areas such as Frankston, one of Melbourne's most affordable suburbs located by the bay at the end of the new tollway," Herron Todd White says in its latest newsletter.

"With improved access, coupled with an affordable median house price and desirable bayside locality, areas such as Frankston could see some major movement in 2008."

Other suburbs along the Eastlink path could also look more appealing to buyers in future, putting suburbs such as Rowville in the frame for above-the-odds growth.³

Brisbane
The chairman of the Real Estate Institute of Queensland, Peter McGrath, cautions buyers against setting their sights on high-end suburbs. Instead, he suggests they look for suburbs with growth potential off a potentially low base.⁴

This could include areas further from the Brisbane CBD such as Ipswich and towns in regional Queensland.

"When it came to house price growth in 2007 you couldn't go past the Brookwater golf community (in Ipswich). Median house prices increased 62.8 per cent to $590,000 in the 12 months to the end of December (2007)," Mr McGrath said.⁵

"While Brookwater's median over the year was affected by varying quality of stock sold - including new properties - the result reflects the desire of many people to live in a new suburb close to all facilities, and of course, the Greg Norman-designed golf course doesn't hurt either," he added.

According to the REIQ, coming in at number two in house price growth over 2007 was Calliope, 20km southwest of Gladstone. Its median house price rose 56 per cent to $352,500. The suburb is benefiting from its seaside location as well its proximity to resource-rich regions.⁶

The state's number three fastest growing locality was the suburb of Pioneer in Mt Isa - the top performer last quarter - with a median house price increase of 53.7 per cent to $315,000 in the 12 months to the end of December 2007. Together with other mining suburbs in the Top 10, Pioneer continues to perform well due to the strength of Queensland's resources sector.⁷

How to spot a boom suburb (before it takes off)
Look for one or more of these factors to spot a boom suburb.

1. Pick areas where people want to live but where it is not easy to create large volumes of new dwellings.
2. Choose suburbs with strong, consistent population growth.
3. Look for suburbs with good infrastructure such as access to schools, hospitals and public transport.
4. Look for affordable areas with properties that can be easily and cost effectively improved. If you like it and can see the value, others may too.
5. Look for suburbs with broad buyer or tenant appeal. The wider the appeal the more buyers there are likely to be when you eventually sell.
6. Know your markets. In general, baby boomers may value lifestyle while young families tend to want space.
7. Major public works such as a new train line or freeway can dramatically increase demand and potentially house prices.
8. Follow the artists and students. Over the past 30 years artists and students have "discovered" boom suburbs long before they took off. Think Carlton, Fitzroy, Surrey Hills and Paddington.
9. Look for suburbs with broad architectural appeal and consistent streetscapes. Homes from the Victorian era through to the 1950s are generally sought after.
10. Find the current hot spots and then research price trends in surrounding suburbs. As buyers are priced out of one area they often move outwards to suburbs with similar appeal and infrastructure. This is known as the ripple effect and is a key to spotting boom suburbs.

¹ Ron Bauer, Australian Financial Review, 28.12.07, p2
^2,3 HTW, Month in Review, February 2008, www.htw.com.au
⁴ Peter McGrath, Brisbane Courier Mail, 19.01.08, p23
^5,6,7 Peter McGrath, Queensland's Top Performing Suburbs, 20.03.08 www.reiq.com.au

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