A research house has suggested investors look toward the low-end property market in both Melbourne and Sydney for the best capital growth opportunities particularly in the long-term.
RiskWise Property Research cites a good employment market and strong population growth associated with these areas as the driving factors for the appreciation in properties it has predicted.
Further, the research house’s favourable outlook regarding the low-end property markets of Australia’s two largest capital cities also stems from the minimal impact interest rate movements have on them.
“Lower-end properties are less subject to credit restrictions and investor activity which actually makes them a great buying opportunity. In fact, in some cases areas, such as Geelong, even benefited from the lending restrictions as buyers looked for more affordable options,” RiskWise chief executive Doron Peleg said.
RiskWise has specifically identified low-end, high crime suburbs that have been earmarked for gentrification as areas likely to produce the strongest price increases in the long-term.
To this end, its own research from February 2018 showed a large number of these areas had outperformed the market.
“Our nationwide research actually found gentrifying suburbs with high crime typically deliver strong price growth and outperform the local benchmark,” Peleg noted.
“We found affordable high-crime areas with significant gentrification are likely to produce strong price growth, particularly when dwelling prices in the inner and middle rings are severely unaffordable,” he added.
According to Peleg, property markets in some major cities overseas had already experienced a similar development.
“For example, even in high danger areas of New York City and London, provided there is strong population growth and severe unaffordability throughout these cities, these crime areas still increase in popularity and therefore experience price increases,” he explained.
“In fact, over the long-term, many low-end areas outperform the top end.”
While the prediction is for strong price growth in low-end suburb houses RiskWise pointed out it did not apply to units.