The Myth of Prime Property
24/08/07
The idea that blue-chip inner-city property will always show better capital growth than property in the outer suburbs is repeated so often that it's become a mantra.
But it's a myth, according to a hard-headed analysis of median growth rates published in the August edition of Australian Property Investor magazine.
Whether examined over one, five, ten or fifteen years, it's
difficult to find examples of top-end locations that have led the
market in terms of capital growth.
"This research should give property buyers pause to think about
what they're constantly told about prime property," API editor
Eynas Brodie says.
"We're not saying that blue-chip property won't show good capital growth but what this research does suggest is that homebuyers and investors shouldn't just assume that property in so-called 'prime' locations is going to outgrow property in other areas.
"In particular, the numbers published in API suggest that 'ugly
duckling' suburbs that undergo gentrification and transform into
'property swans' can show better capital growth than traditionally
prime areas."
API's analysis covers the capital cities of all the mainland
states. Among the findings:
Perth's top 15 suburbs for capital growth over the 10 years from
1997 to 2007 all delivered median price growth averaging between 16
and 20 per cent a year. Of these, six were suburbs with prices
below the Perth average, six were mid-range suburbs and only three
were prime suburbs.
The best performer was Watermans Bay (averaging 19.4 per cent);
this is a prime-located suburb which gives some support to those
who claim prime always out-performs.
But the next six ranked suburbs are all 'ugly duckling' or
mid-priced areas, including downmarket Balga in the northern
suburbs (averaging 18.4 per cent a year over the decade to reach a
median price of $385,000) and the distant mid-range suburb of
Bedfordale (averaging 18.8 per cent a year to reach a median of
$561,000).
Other cheaper areas which have delivered outstanding long-term
price growth include Westminster ($387,000), Midvale ($325,000),
Medina ($269,000), Calista ($302,000), and Girrawheen ($318,000),
all with growth averaging between 16 and 17 per cent a year over 10
years.
By comparison, swanky Dalkeith (median $2.45 million) managed 15.9
per cent, Cottesloe ($1.7 million) did 16.1 per cent, Subiaco ($1.1
million) managed 14.9 per cent and Applecross ($1.3 million)
achieved 12.5 per cent.
SOURCE:Excerpt from Australian Property Investor Magazine
