In our 2019 McGrath Report, we give a much needed simpler and clearer perspective on what’s happening in Sydney and Melbourne as both cities continue to cool.
The 5% to 10% drop we’ve seen so far followed a growth cycle that added 60% to 100% to property values overall. Many people owned property for the entire duration of this cycle and therefore have enjoyed the full benefit.
I believe we have seen the worst of Sydney and Melbourne’s correction and we’re in for a much softer landing than many pundits predicted. My instincts tell me the market has corrected quickly and we are within a few percentage points of new price benchmarks.
In 2019, I see the strong possibility of a mini rebound as buyer demand grows at adjusted pricing levels.
It’s been about a year since both markets began to cool. The theory of a 40% drop has resurfaced, like it did after the last boom and the boom before that; and retreated in the face of indisputable evidence that our market will be just fine.
Our two biggest cities have held the spotlight for many years, so in this year’s McGrath Report we ask the exciting question: which city will be next to step on stage?
History tells us Brisbane and South East Queensland tend to follow Sydney and Melbourne; and with the state economy up north in a turnaround phase, boosted by the biggest infrastructure spend since the 2011 flood recovery, we see great opportunities there now.
Also in this year’s Report, we review some of the social trends impacting Australian real estate.
As our major cities become more crowded, congested and expensive, will more people trade off size for location? Will people sacrifice a bedroom or garden to live closer to the CBD?
As Uber Eats feeds more Australians, will kitchens become less important or even vanish in some instances?
Will young families and empty nesters pull the rip cord on city life and escape to our vibrant, re-emerging regional centres that are readily available within a 90-minute radius of the capitals?
We’ll discuss all these questions in detail over the next few months here on Switzer.
For now, let’s get started with my Top 5 Suburb Picks for greatest capital growth potential in each east coast capital city.
John McGrath’s top suburb Picks
My Sydney suburb picks
1. Putney: Once dominated by mainly public housing residences, this charming waterside pocket is one of Sydney’s least known riverfront addresses. When it goes the way of its sought-after neighbor, Hunters Hill, you’ll be regretting not owning a small piece of it.
2. Avalon Beach: The glorious Northern Beaches continues to offer value to Sydney buyers for a world-class coastal lifestyle. Avalon Beach and surrounds is my pick of the available addresses mainly because of the charming retail village which sets it apart. Enjoy the Palm Beach lifestyle without the hefty price tag.
3. Maroubra: Like Avalon in the north, Maroubra Beach offers relative value if you’re prepared to travel a few extra minutes to track into the CBD. The heartland of the South Sydney Rabbitohs, this beachside neighbourhood will catch up in time to its slightly more glamorous neighbouring beaches.
4. Earlwood: This is one of Sydney’s most diverse multicultural communities with Greek, Italian and Lebanese heritage delivering a wonderful vibe to this beautiful garden suburb. And with Marrickville shops up the road, you won’t go wanting for great eating options or a strong Turkish coffee or two.
5. Stanmore: The Inner West continues to attract both upwardly mobile executives and families, as well as downsizing baby boomers looking to move closer to the action. Attached cottages, bungalows and now a selection of apartments delivers something for almost everyone within 15 minutes of the city.
My Brisbane suburb picks
1. Maroochydore (Sunshine Coast): The economic hub of the Sunshine Coast, the reinvention of Maroochydore is starting to take shape courtesy of its Priority Development Area designation. A 53-hectare greenfield site in the heart of Maroochydore is being transformed into a cutting-edge CBD, with a pledge to provide a 21st century epicentre that includes a high speed, high quality fibre optic network, free public Wi-Fi and an Australian first underground automated waste collection system of this size.
2. Pimpama (Gold Coast): Pimpama recorded Queensland’s fastest population growth at 31% in FY17, with buyers enthusiastically buying or building brand new homes. Pimpama is affordable with a median house price of $475,000 and is located within the rapidly developing northern Gold Coast region along the M1 corridor. The $100 million Pimpama City Shopping Centre is opening in September 2018 and the $56 million Northern Gold Coast Sports and Community Precinct is slated to open in 2020. A brand new $470 million Westfield will open in nearby Coomera in late 2018 and there is a proposed new train station to better connect it to Surfers Paradise. The northern Gold Coast population is projected to double from 75,000 residents to 167,000 in 20 years, accounting for one third of the city’s total growth.
3. Annerley (Brisbane): Only 4km from Brisbane CBD, this suburb has been under the radar until now. It neighbours the more prestigious Highgate Hill and Dutton Park, which is partly why the market is showing signs of growth and gentrification. While you need about $865,000 to buy a house in Dutton Park, next door in Annerley you can pick up a solid home for less than $710,000.
4. Grange (Brisbane): The leafy inner city suburb of Grange is fast becoming popular with young families with its easy access to the CBD, relative affordability, quality schools such as Wilston State School, and access to the airport and both the Sunshine and Gold Coast. The blocks are typically a little larger than the average and for a family friendly suburb, this is king.
5. Springfield Lakes (Brisbane surrounds): Located in the Ipswich region west of Brisbane, this popular master planned community continues to attract new residents with its population growing by 8.7% or 1,400 people in FY17. With a median house price of $440,000, two new releases have come to market over the past year – Springfield Rise and Creekwood. The region is set to benefit from a proposed passenger rail line extension between Ipswich and Springfield via Ripley, which is likely to be constructed after the Cross River Rail project is completed in 2024.
My Melbourne suburb picks
1. Bonbeach: If hunting beachside bargains, Bonbeach must top the 2019 shopping list. With a median house price of just $900,500, expect the ripple effect of pricier neighbours Edithvale and Aspendale to wash over this undervalued postcode. Cafes arrived in 2018; a sure sign of what’s ahead.
2. Thornbury: First home buyers are keen to stay as close to Brunswick’s action as money will allow, which will continue to underpin value growth. Interestingly, apartments listed with a median price of $500,000 are on the market for just 30 days. Strong investor interest and low 1% vacancy rates suggest a strong performer going forward, according to SQM Research.
3. Box Hill: Just 14km from the CBD with its own rail hub and hospital, Box Hill’s astonishing 118.9% growth since 2013 has pushed the median house price to $1.696 million. But its golden era is far from over. The Chinese community, which represents about 27% of residents, fights hard to buy in Box Hill Secondary College zone, one of the city’s top public schools. Houses on large blocks remain goldmines for small developers.
4. Wantirna: Wantirna South’s median entered the $1 million club in 2018, so its sister suburb, Wantirna is inevitably next in line. With a median house price of $960,600, it offers excellent transport links, schools and proximity to Westfield Knox Shopping Centre, which will undergo a long awaited major redevelopment from November 2019.
5. Cheltenham: Straddling Nepean Highway, house prices on Cheltenham’s west side are still well beneath those of its salubrious neighbours Sandringham, Mentone and Black Rock. Its second metro commuter rail option, the recently opened Southland Station, cements this suburb’s profile as a business and commuter hub.
My Canberra suburb picks
1. Campbell: This inner north suburb is a 25 minute walk into the city and a short stroll to Lake Burley Griffin. Several substantial new apartment projects have opened in recent times. A decade-long transformation of Constitution Avenue on the border of Campbell has provided plenty of new eateries and shops for locals.
2. Greenway: A happy hunting ground for investors with impressive apartment median yields of around 6.4%. Greenway’s waterside living is enhanced by mountain views. It is enjoying an influx of people buying affordable new townhouses and drawn by jobs at two government departments including the Department of Social Services national headquarters, which opened in September 2017.
3. Kaleen: This suburb provides a good entry point into the inner north, with original older style homes remaining affordable. Kaleen Plaza, with its major supermarket and specialty shops, is complemented by smaller local shops. Proximity to the city and good transport links are a major plus. Demand pushed house prices up 12.8% in the year to June 2018 to a median $733,000.
4. Mawson: The Mawson Southlands Shopping Centre is about to be redeveloped and upgraded. Young couples are overhauling the older housing stock and a bigger assortment of housing choices is on the way.
5. Harrison: Harrison has expanded rapidly in the past few years, embracing multiculturalism and an inner-city vibe where unit and semi-detached living is popular with young families and professionals. It is set for future growth with local shopping amenity and eateries, close proximity to the airport, and the added benefit of brand new light rail opening in December 2018 providing direct access to the CBD.
We hope the 2019 McGrath Report provides fresh insights and ideas for your benefit into the future. Please download your copy from www.mcgrath.com.au
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