Where are the opportunities in the current market?

In any market, there is always opportunity, even in one where prices have risen as much as they have over the past two years. These are property types that I think are worth a look.

1. Apartments

The cost of building new apartments has skyrocketed and as a result, existing apartments in many suburbs are looking like really good value. Already we are seeing places like Brisbane experience faster price growth for apartments compared to houses. In Brisbane’s inner suburbs, house prices have increased by 7.4 per cent over the past 12 months. In comparison, unit prices have jumped by over 11 per cent.

The best places to buy an apartment tend to be those where there are not a lot of new apartments proposed. These areas can provide opportunity, particularly if the apartment is well located or well designed, however if there are hundreds of apartments expected to come online, this tends to dilute price growth. Recent data from the Gold Coast however has shown that not even high levels of supply necessarily dilute future price growth – apartments are seeing stronger growth here compared to houses.

2. Unrenovated homes

In many parts of Australia, the cost of building a new home has increased by more than 40 per cent over the past two years. The drivers of these price increases are also applying to the cost of renovations. While costs are still high, the increases are starting to moderate. The costs of some building materials are even falling – brick prices keep increasing but timber and steel product prices have fallen.

With the cost of renovating so high, many unrenovated homes are selling for a larger gap between similar homes that have been renovated. If you are prepared to hold for construction prices to moderate further, or alternatively are able to undertake renovations yourself, an unrenovated property may be worth a look.

3. Melbourne

The Victorian economy is having a tough run and homeowners, particularly investors, are bearing the brunt of repaying high levels of government debt. It is therefore no surprise that many parts of the city are seeing price declines. The places leading the declines are highly desirable with suburbs such as Malvern East, Hawthorn and Caulfield seeing some of the largest falls.

This downturn will not continue forever. A cut in interest rates will help and at some point, the economy will pick up again. In its favour, Melbourne continues to be ranked Australia’s most liveable city, as measured by the Economist Intelligence Unit in their global study. It also continues to attract a lion’s share of international migration and will in time, become Australia’s largest city.

4. The Golden Arc

South-east Queensland has expanded south of the border. Or perhaps Northern New South Wales is pushing into Queensland. Whatever the case, the region spanning from Yamba to Byron Bay to Gold Coast, Brisbane and Sunshine Coast is a very strong housing market at the moment. While population growth and limited housing development has been a driver, so has the changing economy. The area is getting wealthier and the economy is becoming more diverse. While not Sydney priced as yet, many parts of this area is now more expensive than Melbourne and prices are set to continue to grow.

5. Perth

Perth has a reputation as being a boom/bust market which is why there are a lot of views as to whether we are in for an upcoming bust. Price growth in Perth has been incredibly strong, topping the nation for several years. And while some believe that it is mainly speculation that has driven this price growth, it is also matched by the strongest rental growth in the country. After a prolonged downturn, Perth prices have played catch up

Will it continue? With iron ore and lithium prices trending down, the extremely strong price growth may come to an end. There is however another element that is driving costs upwards. It is simply so much more expensive to build a home in Perth now compared to what it was prior to the pandemic. In addition, while building costs have moderated in most of Australia, they have re-accelerated in Perth. These replacement costs mean that house prices in Perth still have some way to go.