Property investors may benefit from more growth in values by targeting apartments over houses – especially in Sydney’s coastal areas and inner city suburbs.

A new report identified Sydney was now home to 15 of the best 75 markets for capital growth potential across the country, the second highest concentration of growth areas after Perth.

Many of the areas where prices were expected to outperform the rest of the market were higher density areas near expanding infrastructure, according to research group Hotspotting’s Price Predictor Index.

They included Avalon Beach, Clovelly, Rose Bay, Waterloo, Zetland and Meadowbank, among others.

The Hotspotting report showed unit purchasers in these areas would benefit from above average growth in property values, higher rents relative to mortgage costs and lower vacancies.

It comes as recent PropTrack modelling showed home prices across Sydney were expected to rise by an average of about 3-6 per cent over 2023 – despite interest rate rises reducing buyers’ borrowing capacity.

But PropTrack noted there would be uneven performance across the market, with lower priced properties expected to attract more demand.

Areas with a tighter supply of available housing would also perform stronger while suburbs where listings have been climbing would see less growth – if at all.

Hotspotting director Terry Ryder said apartments overall were outperforming stand-alone houses this year in a number of ways, including faster growth in rents and values.

“There is a plethora of reasons why apartments are increasingly becoming the property of first choice for homebuyers and investors,” Mr Ryder said.

“It’s not just about affordability,” he said. “Our population is simply embracing apartment living more because of the opportunity to reside in more desirable locations.”

Mr Ryder added that some of the new units recently developed were being aimed more at families, which would increase their appeal over time.

“Developers have also been constructing more owner occupier stock, such as three- and four-bedroom apartments, as well as offering superior resident facilities such as rooftop and BBQ areas, infinity pools and spas,” Mr Ryder said.

Hotspotting identified 74 “supercharged suburbs” where sales volumes have been consistently rising for three quarters or more, which was reported as a reliable indicator of future price growth.

“Sustained rises in sales volumes will be followed by a rise in prices,” Mr Ryder said.

“History shows us there is a correlation between sales volumes and price movements – the number of sales changes first and prices react – with a time lag. This is true whether markets are rising or falling.”

Hotspotting general manager Tim Graham said the 74 supercharged suburbs list was dominated by Western Australia, which was deemed the nation’s best property market at present.

“With 26 of the 74 supercharged suburbs being in WA, and especially in Perth, this is further proof that homebuyers and investors continue to be highly active on the west coast,” he said.

“Interestingly, NSW was the second-best performer when it came to the number of suburbs on the list – with 15 of the 74 – with many of these suburbs being some of the Sydney’s most desirable as well.”

Some of the higher density NSW suburbs on the supercharged list included Wolli Creek, Zetland, Waterloo and Ultimo.

Local agents revealed these areas were once oversupplied with apartments, but the glut of available homes had long disappeared and rising popularity with buyers and a slowdown in new construction meant demand now exceeded supply.

Right Property Group director Victor Kumar told a Property Investment Professionals of Australia panel that spring would be a key test for the NSW housing market.

“The NSW housing market has been quite resilient,” he said. “But I believe the true tell will come once more stock comes onto the market, which may lead to copycat sellers rushing to the market.”

Mr Kumar said the market would be influenced by various factors, such as economic conditions, government policies, buyer preferences, and affordability.

“Compound that with a strong immigration factor, and we have a stabilisation of value despite the negative economic and affordability outlook,” he said.

Hotspotting’s research showed Adelaide was also likely to be a strong market over the coming years and the lower prices relative to other capitals could draw more investors on a tight budget.

Sydneysider Alice Willshire, 24, recently purchased an investment property in northern Adelaide with the help of investment advisory group Custodian, and said it was a more realistic option for her considering her lower income.

“In Sydney, there is no way I could do it, it’s too expensive,” she said. “Adelaide has good potential and the rents compared to the mortgage costs were good.”

Originally Published: Aidan Devine | Daily Telegraph | 21 August 2023

https://www.dailytelegraph.com.au/property/opportunity-for-investors-suburbs-where-property-prices-are-set-to-outperform/news-story/f13a5a5f8c47415659905de489bcf01a?btr=f1a4eae52ebd0a4d480c6768db33ed5c