Middle suburbs seize real estate crown

For years, the primacy of inner suburban property has been the unquestioned mantra of investors and analysts alike. But it appears the inner city’s reign as best real estate performer has come to an end.

New RP Data figures obtained exclusively by realestate.com.au shows that in three of Australia’s biggest cities, houses 10-30 kilometres from the CBD are outperforming those in the inner suburbs.

Houses on the outskirts of the CBD are performing better those in the inner suburbs.

And it’s no fluke of the season either, with both 12 month and five year data showing the same trend.

Selling trends: Houses

Sydney, NSW

Melbourne, VIC

Perth, WA

Across the country

It’s a different story in Brisbane or Adelaide though; here the inner suburbs retain their crown. But while it remains a one horse race in Brisbane, in Adelaide the results are closer, with data showing the middle and outer rings performing better over the last 12 months.

Brisbane, QLD

Adelaide, SA

Selling trends: Units

For units, the picture is a little less defined.

In Sydney, middle ring units have the best performance over five years. In Melbourne inner and middle suburbs were dead even with the outer ring the top performer. While in other cities, the inner suburbs are faring best.

Melbourne outlook

Miriam Sandkuhler, Director of Property Mavens, South Melbourne says the lower price points in Melbourne’s middle suburbs makes for a more affordable entry point into the market.

Lower price points in middle suburbs often offer an affordable entry point into the market in Melbourne.

“These areas are attracting SMSF investors chasing yield over capital growth and first home buyers taking advantage of better affordability and a low density lifestyle,” says Sandkuhler.

“But I would advise investors to consider the dollar returns, which show inner city property, as a general rule, performing best from a cash point of view because of their higher median prices.”

Sydney perspective

In Sydney, Rich Harvey, Managing Director of Propertybuyer.com.au says: “Many high priced inner suburbs have realised a lot of their growth potential.”

“It’s in the middle ring, dominated by upgrading buyers, where you find the bulk of transactions because this is where middle Australia lives. It is the supply and demand equation in these areas that is more likely to drive ongoing growth.”

“Despite some fantastic gains over the last decade, I think the outer suburbs may prove more susceptible to interest rate rises which may start next year. That’s not the case in the inner ring which is more influenced by business confidence and the share market”, Harvey states. “While there should be growth there over the next decade, it’s unlikely we would see a doubling of prices, which is a real possibility in middle ring suburbs.”

Units in middle ring suburbs may double in price over the next decade.

“These figures debunk the myth that you need to buy close in to the city to make good returns out of the property market,” Harvey says.

That’s promising news for all prospective buyers and investors.

Source: RP Data, October 2014.