Property: Where Gen Y will buy

Outer suburbs are on track to deliver better returns than inner city over the medium term.

Summary: Outer suburbs are on track to deliver better returns than inner city over the medium term. Data shows those who were prepared to invest in less popular areas with good growth potential back in the 1980s and 90s would have been handsomely rewarded.
Key take-out: As Gen Y starts to enter the property market over the next few years, they will need to balance their desire to live in a ‘popular’ area versus the long-term value of their new home.
Key beneficiaries: General investors. Category: Property.

Just occasionally demographics and investment trends intersect: Property research group Residex has released fascinating tables which show where the baby boomers made money from residential property and where today's Gen Y buyers are most likely to buy.

Concentrating on the three capital cities (Brisbane, Melbourne and Sydney), the research suggests that once again the big money will be make in the “burbs”: Indeed, suburbs currently on the outer edge of our major cities are once again nominated as the areas set to shine.

Using the latest data from the ASX-listed property services group, Onthehouse Holdings, Residex notes:

Like in the 1980s, outer city suburbs will tend to grow faster than inner city areas, potentially offering greater returns for buyers.

Kellyville Ridge (Sydney), Mickelham (Melbourne), and Heathwood (Brisbane) were the top suburbs to buy in 1980. Homeowners who bought there in 1980 have seen their property values grow 678%, 647% and 1,900% respectively.

Inner-city suburbs that have bucked this trend include Bronte in Sydney and Albert Park in Melbourne.

In order to find suburbs that would offer a similar proposition to first-time buyers when it came to long-term growth, onthehouse.com.au selected the top suburbs based on Residex’s eight-year prediction model. The data was adjusted to focus on properties valued under $500,000, to make it more relevant for first-time buyers.

The future predictions reveal that:

Sydney’s western suburbs, Melbourne’s south east and suburbs in Brisbane’s south, far north and east stand out in terms of growth potential.

Yellow Rock in Sydney, Skenes Creek in Melbourne and Munruben in Brisbane top the prediction models.

Today’s bargain suburbs could deliver great results for homeowners in the long term. Of course, there will be variations depending on the property itself and its location, but overall I believe these suburbs could be the future hidden gems. It’s really important that any first-time buyers do extensive research before making that commitment.

Top five areas in Sydney with highest growth rates 1980 – 2013 (adjusted for inflation):

1. Kellyville Ridge – up 678%.

2. Blairmount – up 621%.

3. Windsor Downs – up 531%.

4. Duffys Forest – up 522%.

5. Bronte – up 490%.

Top five areas in Melbourne with highest growth rates 1980 – 2013 (adjusted for inflation):

1. Mickleham – up 647%.

2. Elwood – up 585%.

3. Port Melbourne – up 576%.

4. Albert Park – up 574%.

5. Deepdene – up 569%.

Top five areas in Brisbane with highest growth rates 1980 – 2013 (adjusted for inflation):

1. Heathwood – up 1900%.

2. Berrinba – up 1775%.

3. Peachester – up 1234%.

4. Delaneys Creek – up 946%.

5. Forestdale – up 874%.

Top Five areas in Sydney predicted to grow in the next eight years:

1. Yellow rock – predicted to grow by 10% per annum.

2. Glenmore Park – predicted to grow by 10% pa.

3. Hassall Grove – predicted to grow by 10% pa.

4. Oakhurst – predicted to grow by 10% pa.

5. Erskine Park – predicted to grow by 10% pa.

Top Five areas in Melbourne predicted to grow in the next eight years:

1. Skenes Creek – predicted to grow by 9% pa.

2. Caroline Springs – predicted to grow by 8% pa.

3. Geelong – predicted to grow by 8% pa.

4. Apollo Bay – predicted to grow by 8% pa.

5. South Geelong – predicted to grow by 8% pa.

Top Five areas in Brisbane predicted to grow in the next eight years:

1. Munruben – predicted to grow by 10% pa.

2. Heritage Park – predicted to grow by 10% pa.

3. Scarborough – predicted to grow by 9% pa.

4. Chambers Flat – predicted to grow by 9% pa.

5. Lota – predicted to grow by 9% pa.

We’ve all heard anecdotal evidence of people who bought cheap in the 1980s and are now sitting on huge returns, and this data shows that those who were prepared to invest in less popular areas with good growth potential back in the 80s and 90s would indeed have been handsomely rewarded.

As Gen Y starts to enter the property market over the next few years, they will also need to balance their desire to live in a ‘popular’ area versus the long term value of their new home.


John Edwards is a consulting analyst to onthehouse.com.au and founder of Residex.