Property hot spots: The suburbs still looking good for investors

Savvy property investors can still nab property in great locations. (Source: Getty)

The Australian property market has taken a somewhat unexpected journey over the past year, with price drops appearing to be much softer than expected.

In late 2022, about halfway through the RBA’s unprecedented series of rate hikes, several major banks predicted national property prices would fall by as much as 15-20 per cent from their peak. Finder's panel of economists were slightly more optimistic, predicting in November 2022 an average house price drop of 11 per cent across all major capital cities.

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According to the CoreLogic Home Value Index, property values rose by 0.6 per cent in March, following a 10-month series of falls. The total decline from the most recent peak is 8.5 per cent - less than predicted falls, but still significant.

Though numerous supply and demand factors contribute to the unexpected resilience of the property market, it underscores the enduring appeal of real estate for both investors and owner-occupiers.

Identifying investment potential

As with any investment, caution is essential, and the reported 8.5 per cent average decline conceals significant fluctuations across some of the capital cities. Given this context, what strategies should shrewd investors employ to secure investments that are truly "as safe as houses"?

The recently updated Finder Property Investment Index aims to identify suburbs in and around capital cities that exhibit the most promising investment potential. Although absolute price stability remains uncertain, the top-ranking suburbs are expected to demonstrate resilience against potential market downturns. Suburbs are assigned a score out of 100, with points allocated according to factors such as market demand, population change, property sale prices, and transaction volume.

Sydney’s top-ranked suburbs

In greater Sydney, Brookvale (91 points), Dawes Point (89) and Point Frederick (87) have emerged as the top suburbs for potential house purchasers. Meanwhile, Forest Lodge (93), Macquarie Links (87) and Bella Vista (85) lead the way for apartments.

Brookvale's high ranking is attributed to its strong performance in property sales price and growth, while Forest Lodge's top position for units is due to its high property sales price and favourable population-related factors, such as income and population size.

Melbourne’s top-ranked suburbs

In and around Melbourne, the most attractive suburbs for house investments include the rural suburb of Officer South (91), the seaside towns of Shoreham (90) and Edithvale (88), while Research (90), Cape Schanck (90) and Brighton East (89) take the lead for units.

Edithvale was among the brightest spots in Melbourne for property investors. (Source: Getty) (Chris Kean / 500px via Getty Images)

Officer South's high ranking is driven by its performance in market components, such as sales turnover percentage and number of days on the market, as well as population-related factors like population growth, income growth and a low unemployment rate. Research's strong showing on the units list is a result of its high property sales price and growth.

Brisbane’s top-ranked suburbs

In Brisbane and its surrounds, Chelmer (87), Corinda (85) and Wilston (85) are the top-scoring suburbs for house purchases. Chelmer also tops the list for units, with a slightly higher score of 95, followed by Pallara (95) and Joyner (94).

Chelmer's dominant position in both categories can be attributed to its high scores in property sales price and growth, as well as its high score in the market component, specifically unit sales turnover percentage. In addition to these cities, Finder's index also covers Adelaide, Perth and Hobart, all of which are linked via the above pages.

Do your research

It is essential to acknowledge the ongoing uncertainty surrounding the property market. Although the initial dire predictions regarding price drops have not fully materialised, the 8.5 per cent decline is still substantial and the International Monetary Fund has forecast potential challenges for the global economy.

Finder's index is a useful tool for pinpointing suburbs with high investment potential but should not be solely relied upon when making investment decisions. Prospective homebuyers should conduct thorough research before settling on a property, and arrange financing early in the process to avoid last-minute hurdles that could lead to signing up for an unfavourable rate.

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