How to find the investment grade suburbs in Brisbane’s property market

Are you considering investments in Australian property? One where properties are likely to outperform? And we’re not talking about hot spots, but suburbs that will outperform in the long term.

Well, they are there if you know how and where to look. Recent property data has shown there are some very mixed results for Brisbane houses. Depending on where you find your data, the average house price in Brisbane has grown anywhere from 0.1% to around 1%.

But there are a number of suburbs that have achieved significantly higher growth than the average. In fact there are a number of suburbs achieving growth in the double digits. So let’s figure out where it’s worth buying property in Brisbane as an investment.

The usual suspects

It’s interesting, but you will be able to identify these suburbs as they make the same list every second or third year. They always seem to be powering ahead. They make the list for two reasons – supply and demand.

When we say supply, it means there is less availability of land and therefore properties are in short supply. And demand comes from a number of factors, including:

  • People want to live in these suburbs – they are aspirational suburbs (as opposed to many of the cheaper suburbs where people choose to live because that’s all they can afford.
  • They are close to employment hubs where more high paying jobs are being created
  • These suburbs are gentrifying – people with higher incomes are moving in
  • People living in these suburbs have higher wages growth than the average for the state
  • There are local lifestyle precincts – another reason for attracting a gentrifying demographic
  • There is easy access to public transport
  • There are strong school catchments – a magnet for families

Demand does not wane for these types of locations and they are not building any more of them.

We also check to see the following.

The local economy is providing new jobs

    A thriving local economy encourages people to move there and ensures locals have the job certainty and the money to buy or rent properties.

    The local population is growing

      Apart from more people it’s important to have the right demographic moving to the area – people in the family formation stage of their lives and people of working age rather than an aging population.

      The local infrastructure spending

        When the local council plans to improve roads, public transport options and local amenity this creates more local jobs, which boosts the economy and leads to more people moving to the location.

        What about all those new suburbs?

        Sometimes new suburbs make the high growth list once, but they rarely make the list again. They start out as acreages or even small farms that are acquired, subdivided and developed into smaller parcels of land – smallish sites for new homes.

        Growth in these locations generally tends to be more physical growth, with towns, shops and schools etc rising from the ground in a short timeframe.

        One day a large acreage property, six months later there are 100 new house and land packages.

        Because there is an abundance of land still to be developed there is no shortage of land and an abundance of supply, sometimes lasting a decade or more.

        These areas are generally a lot further out from the CBD and usually have inferior infrastructure and public transport and rarely have any of the investment fundamentals, leading to a lack of capital growth.

        Sure these suburbs are more affordable for young families, but the prevailing demographic in these locations tend to have lower wages growth than those living closer to the CBD, another reason these locations suffer from poor capital growth.

        A clear winner

        For us it is the usual suspects that we always look to invest our money. It is the known, proven and trusted locations that will continue to be in high demand and continue to outperform the averages. They will be able to grow your asset base faster and will have wealth producing levels of income one day.

        Newer suburbs will no doubt appear to outperform from time to time, but you need to ensure that investment fundamentals are strong and avoid areas with more and more housing estates still in the pipeline.

        These locations may assist with a once of equity boost, but as newer suburbs come up, prices and rents will continue to decline and that equity will evaporate.

        There are clear winners once you can interpret the data and understand its fundamentals. And remember that while location does around 80% of your property’s long term performance, of course you need to own the right property in that location.