Every time a property market booms, there’s a loud chorus from buyers lamenting the fact they didn’t get into the market earlier.
Whether you’re a first home buyer, a property investor or upgrading to your next home, it can pay dividends to buy into an emerging suburb rather than one where prices have already skyrocketed.
What is an emerging suburb?
An emerging suburb is one where property values are expected to escalate faster than in other locations.
- It’s basically an ‘up-and-coming’ suburb that is right next door to blue-chip suburbs where prices are already at a premium.
- The suburb is experiencing a transition, mainly because of buyers who are priced out of a blue-chip suburb extending their search into the neighbouring suburbs.
- Often, emerging suburbs can be a result of gentrification, when new demographic moves into an established suburb and older homes are either upgraded or demolished to make way for new homes.
- New infrastructure like public transport hubs, shopping centres, medical or education facilities can also prompt a suburb’s transition from overlooked to in-demand.
Why is an emerging suburb important for me?
Property investors are always looking for the best suburbs to invest in. It’s all about creating more equity in less time.
Let’s do the maths!
If you can choose between buying a house in a blue-chip suburb with a growth forecast of 5% per annum or an emerging suburb with a growth forecast of 10% per annum, which would you choose?
Clearly, the emerging suburb would be the winner as it’ll give you a better return on your interest, provided it meets any other investment goals you have.
How do you know if a suburb is about to boom?
While there’s no crystal ball to predict which suburbs will boom next, there are a whole host of indicators we can use to help spot an emerging suburb.
We can access some of these indicators online using data providers like the Australian Bureau of Statistics, PriceFinder and RPData.
On these websites, you can find out about property prices and whether they’re going up, down or sideways; and you can learn about demographics. You’re looking for telltale signs of demographic shifts like greater numbers of young professionals and tertiary-educated residents moving into a suburb.
There are also government websites providing crime statistics and information on infrastructure projects and plans for growth corridors.
There are a few signs that you can look out for if you want to spot an emerging suburb quickly. These indicators will require a physical visit to the suburbs on your shortlist.
What to look out for?
- Walk the streets and see what type of dwellings prevail and whether old homes are being knocked down or renovated.
- Check out car models parked in driveways and on the street. If there are BMWs and Teslas parked out front of tired period homes, it may indicate cashed-up owners are about to transform the property.
- Visit the local shops and cafes and see what kind of food they’re serving and what kind of customers they’re attracting.
- Take the dog for a run in the local parks and chat with other dog owners about property prices and council improvements.
- Notice the age of the local residents. If an inner-city suburb is home to lots of older folks, there could be a changing of the guard on the horizon.
The trick is to identify the stages of gentrification early on to be able to benefit from better capital growth.
How does the ripple effect come into play?
When buyers are priced out of their target suburb, they will often move their search to the adjoining suburbs, hoping to snare an affordable property close by.
But as more buyers are forced to make this shift, demand increases, which in turn pushes up prices in those adjoining suburbs. This is known as the ripple effect.
Inner-city suburbs will often be the first to rise in value when the property market is moving through a growth cycle, and price growth will ripple outwards from those suburbs.
If you’re able to spot this ripple effect, you might also be able to spot an emerging suburb easily.
What suburb should I invest in?
There’s no one-size-fits-all answer to this question, but you can use the points below to help steer you in the right direction.
The factors affecting your decisions to move into an emerging suburb might differ too.
| Things to consider while buying | First home buyer incentives Lower interest Affordable mortgage Profit from the overall price growth in the market |
| Where can you buy? | Less expensive Inner and outer suburbs Wherever the price is growing |
I’m a first home buyer
Buying a first home is a significant milestone for many. That’s why you need to make sure that you plan well and consider the following factors carefully:
- The property price and growth in the emerging suburbs
- Whether or not you have access to hospitals, schools, shopping centres and transport nearby
- How far you are from your family and friends
- Whether you want to avoid travelling long distances for work (you could overlook this factor if you work from home)
- The crime rate in the areas that you’re interested in
I’m an investor
Property values can get highly competitive from one suburb to another. To spot the best suburb to buy an investment property, you may want to look out for factors such as:
- Transportation, for example, train lines that connect the suburb with major cities.
- Medical services such as hospitals and pharmacies
- Capital growth in the area
- Income from development potential, such as rental income from a duplex
- Changing demographics, for example, emerging suburbs generally have younger people moving in
Is rentvesting a sign to spot an ‘up and coming’ suburb?
Yes, only if you’re able to determine whether an area is home to a lot of rentvestors!
Instead of saving a big deposit and waiting to earn a higher income, some Australians decide to rent in the area they want to live in.
Paying rent is much cheaper than making mortgage repayments, especially in an emerging suburb.
In areas with high rental yield, your rental income might be enough to cover your mortgage repayments. In case it doesn’t, you may still be able to benefit from negative gearing.
So, if you’re thinking of rentvesting in a suburb you really like, chances are you’re not the first one.
That’s why a rentvesting pattern in an area could be a clear give away for an emerging suburb.
Emerging Suburb: Case Study of Redfern
| Pre-gentrification | What changed? | The Result |
|---|---|---|
Once described as the “Black Heart” of Australia, Redfern was a centre for the Indigenous community. The suburb was practically a no-go zone for many Sydneysiders due to its reputation as a land of drug use, graffiti, fires, assault and violence. The suburb also grabbed headlines in 2004 due to riots erupting at Redfern. The city’s median house price was about half a million dollars. | In 2004, a special government committee - Redfern/Waterloo Authority was established to oversee the area’s rapid development. With the change in demographics, Redfern’s array of amenities have evolved too. It has also become popular among tech startups and emerging businesses. | Redfern changed over the years to basically become an extension of neighbouring Surry Hills- an affluent suburb. There are trendy cafes, hip pubs, bakeries, medical services, and other high-end hangout spots for residents. The city’s current median house price is just over a million dollars. |
Looking to buy a property or invest in an emerging suburb?
Call us on 1300 889 743 or fill in our free assessment form, and our experts will help you with your mortgage requirements.
It doesn’t matter if you’re a first home buyer or an investor; spotting an emerging suburb could put you ahead in the property market and give you the best start on your property journey.
Let us help you!