8 tips for choosing the right suburb to invest in

When you’re shopping around for a new investment property, it’s crucial to buy in a suburb that is likely to go up in value, has minimum risks, and has the potential for maximum returns. 

Here are our top tips on how you can pick out the best suburbs for investing:

1. Know your budget

Before we get down to the main task of finding the right suburb, it’s important to know how much your budget is for your property purchase. For most buyers, their buying capacity dictates where they can afford to invest.

This is especially true in Australia, where the median dwelling values can widely vary depending on where you’re buying. In today’s market, you can expect median property prices to range from $500,000 in Perth up to $1.1 million in Sydney.

To determine your budget and your borrowing capacity, it’s advised to meet with a mortgage broker or a lender and get pre-approval for a loan. 

With your budget locked down, you’re in a position to choose from a short-listed number of suburbs or locations where you can buy your desired property within your price range. 

2. Review the sales data

When looking for an investment property, it’s crucial that you understand the demographics and market performance of the suburb you choose to invest in. 

Check out reputable sources that can provide you with data on the sales performance in suburbs over a number of years.

Looking at historical data will help you determine where a suburb is at in its cycle – whether it’s peaking, bottoming out or close to a boom. When examining the data, check out the historical growth trends: how has the market performed over the last one, three and five years? If you want to know a prospective suburb up close and personal, another way is to contact local agents in the area. Real estate agents can also help you analyse the performance history of other rentals in the area, including vacancy rates, current yields, rental returns and highest demand property types. This should help you to narrow down your property search, whether you are an investor or a home buyer.

The good news is that you won’t have to look far to get this information! Head on over to Smart Property Investment’s Suburb Search page to get a profile of every suburb across Australian states and territories. Just enter the suburb name or postcode and press the suburb to get an insight on vital market info, including growth rates, vacancy rates, median house prices, time on market and key demographic data.

 3. Look at the available supply and existing demand

So you’ve determined that your target suburb is doing well in terms of sales, which could indicate strong demand and property marketability. While this is good news, this is just one side of the coin. 

Even if a suburb is doing well in terms of sales, it’s also best to factor in how much construction is happening in the area. 

If there are plenty of developments in the pipeline, this could lead to oversupply, which, in turn, will result in prices and property values and rental yields declining. 

In terms of demand, make sure to also check the population growth in the area. A suburb with a growing population is also bound to strain supplies of available property stock. 

4. Explore neighbouring suburbs 

When you’re investing for capital growth, remember to look at the long-term picture. This means that what’s booming now may not be a good investment because prices are already running high and returns are slowing. Thus, you don’t get to cash in the maximum returns you are seeking. 

If this is the case, you may want to avoid areas that are peaking and opt for a nearby, more affordable option that is likely to benefit from the ripple effect.  This way, you will already have a claim in the area when it begins to boom.

Additionally, neighbouring suburbs may offer more options that could be more in line with your budget and your preferred type of property. You may even be able to get a good bargain. 

5. Follow the infrastructure  

One thing to research is whether there are any planned infrastructure developments in the suburb or the nearby area. 

The availability of amenities and infrastructure adds considerably to a suburb’s value, so keeping an eye on government proposals for implementation can work to your advantage.

Research what infrastructure projects are happening in the area. Is there new public transport planned? Is a shopping centre being launched that is nearby? These amenities can improve a property’s appeal to potential tenants and/or home buyers. 

For example, if a new supermarket or shopping centre is due to open, this may indicate the company has done their research and discovered that the suburb is set to see a significant growth rate. This will also impact how you view the public amenities aspect of your decision-making process.

On that note, make sure to read our article on why infrastructure projects matter when researching your next property investment. 

6. Identify gentrifying areas

Gentrification is the process of transformation of a neighbourhood’s characteristics through the influx of wealthier residents and businesses into once lower-income areas. It is one of the significant changes that occur in Australian cities (and across the world), where property values are pushed up in inner- and middle-ring suburbs.

There are many suburbs in Australia that were once considered poor, but that has since gotten a boost as young working professionals and families move in and gentrify the suburb’s stock.

To know if a suburb has potential for gentrification, check the streetscapes for new renovations and be familiar with the trends of house prices over the last two to three years. Know who makes up the significant proportion of buyers. If you see that the majority of buyers are young and financially sound (e.g. employed), this signifies strong gentrification potential. 

When investigating a new area, it’s also advisable to get a first-hand account from residents of why they like living in the area. Check the suburb’s most popular spots, whether that’s a local family-friendly picnic area or coffee spot, and observe the type of atmosphere and people who are there. 

For example, if you observe that business in the local restaurant, retail and café scene is picking up, you may be looking at an area that has strong growth potential. 

7. Consider lifestyle attractions and public amenities 

Areas that offer lifestyle attractions and public amenities are favoured by buyers and renters when compared with other suburbs that don’t have them. 

For some tenants, close proximity to lifestyle attractions and public amenities is on top of their list when searching for a new place to live or rent in. If they are even within walking distance, that’s an even bigger bonus!

Some lifestyle attractions to consider include walking tracks and trails, large family parks, creeks, and lifestyle villages. 

Cultural facilities are also desirable in a suburb. This can include places such as museums, art galleries, music and performance venues, and more. By having these nearby, the suburb can feel like a hub of activity and may be more attractive to many tenants and home buyers. 

Another lifestyle attraction to consider is water and city views. Will the property have views of lush greenery or the ocean? Or is the view just gonna show a busy highway? While it may not be an essential factor for buyers or tenants, properties with high asking prices tend to have a reasonable view.

8. Don’t be afraid to venture beyond your backyard

While many investors are more comfortable with investing in their local area or state, being afraid to seek out opportunities beyond your backyard can be detrimental, especially if you live in an area that has limited growth potential. 

On your search, you will also encounter many suburbs across every state that locals will caution against buying in. But experts advise that sometimes, having a fresh set of eyes without being aware of a suburb’s “stigma” can work in your favour because you are viewing the suburb based on the fundamental factors that make a suburb valuable.  

Moreover, if the said “stigma” is debunked or forgotten, you will thank yourself for buying into the suburb while prices are still low. 

Equip yourself with research, and look into suburbs you may not have considered before, depending on where your due diligence takes you.     

If you want to know more about how location can make or break your property investment, read our article on the three reasons why location matters in real estate. You can also tune in to this episode of Property Showcase, where Pete Wargent, the chief operating officer and co-founder of BuyersBuyers, discusses how to successfully buy and invest in property beyond your backyard. 

Disclaimer: The information provided in the article is general and should not be perceived as personal advice. It is highly recommended to consult with financial advice from a suitably qualified adviser.

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