Top Tips To Find Affordable Inner City Properties

By John McGrath , Property Expert

We hear a lot about housing affordability in the media and that Australian property prices are among the highest in the world. Rising property prices are ‘bad news’ for buyers but certainly good news for home owners enjoying the long-term wealth generation that real estate brings.

While I do agree that finding an affordable house close to the CBD in our major capitals is a challenge, I absolutely disagree that it can’t be done – and new statistics from RP Data prove it.

If you’re a buyer, you probably associate housing affordability with the outer ring suburbs of your city (ie more than 20km from the CBD). I know of some fantastic family-friendly areas in the outer rings but I also understand how unappealing the long CBD commute can be for many buyers. Sure, you can buy a three bedroom house in Liverpool in Sydney’s west for $400,000 but it can take 90 minutes door to door to get to work! So yes, inner city living is much more desirable.

The median Sydney house price is $600,000. It’s $515,000 in Melbourne, $495,000 in Perth, $470,000 in Brisbane and $406,500 in Adelaide. Many buyers look at these numbers and think ‘no way’, and they close their minds to the idea of buying. But did you know that in Sydney, there are 3 suburbs within 10km of the CBD (Inner Ring – IR) and 39 within 10-19km (Middle Ring – MR) where you can buy a house for less than the median? In Melbourne, there’s 5 (IR) and 58 (MR); Perth 11 (IR), 50 (MR); Brisbane 11 (IR), 47 (MR); and Adelaide 36 (IR), 58 (MR).

Let’s take a look at the most affordable suburbs within 10km of the CBD in every major capital. In Sydney, you can buy a house in Sydenham for around $550,000. Incidentally, Sydenham is about the same distance from the CBD as Bellevue Hill where houses cost a median $3.65M.

In Melbourne, the most affordable suburb within 10km of the CBD is Braybrook at $390,000. In Brisbane, Rocklea $387,000. In Adelaide, Wingfield $264,000. In Perth, Cloverdale $415,000.

But yes, there’s a trade-off. If you want to buy close to the CBD but under the city’s median price then you’re probably looking at an old house with maintenance issues in a neighbourhood with some factories and warehouses and very few cafes and recreational facilities.

The good news is if you’re willing to buy now and wait out the gentrification process, you’ll be rewarded. (And in the meantime it’s just a 10 or 15 minute trip to work every day!)

I’ll give you a personal example. In 1984 I bought a little fixer-upper terrace in Paddington, Sydney. Nowadays, Paddington is blue ribbon real estate but back then the suburb was quite run-down and bohemian. I paid $96,000 and knocked it into shape so I could put in some tenants. A few years later when I started my real estate agency, I needed capital so unfortunately I had to sell it. I sold it for $260,000 – more than double my purchase price.

Savvy property investors are always on the look out for the hot spots of tomorrow because that’s where the greatest potential for capital growth lies. They search for the up-and-coming suburbs on the brink of transformation by urban renewal, gentrification or improved infrastructure. When people bought terraces in Paddington in the 1970s it was a suburb in decline. But visionary bargain hunters bought anyway, renovated and enjoyed the ride as prices skyrocketed in the 1980s and 90s. Today, there are still scores of inner city suburbs in all our capital cities that are yet to be fully gentrified – in fact some of them haven’t even begun the process.

In Sydney, neighbouring suburbs Sydenham, Tempe and Marrickville are getting a lot of media airplay. Marrickville’s gentrification has been well underway for a few years and it’s actually now referred to as ‘the new Paddington’ of Sydney. Tempe and Sydenham are right next door and the spill over effect has already begun with priced out buyers going next door for affordability.

So how do you find the next great hot spot? A location close to the CBD is the perfect start. As our population increases, so will demand for property close to our major employment hubs. It’s a no-brainer.

Then it’s down to the four telltale signs of potential future growth: new infrastructure (roads, schools), gentrification (lots of renovations), redevelopment of former industrial sites (into shopping centres etc) and enhanced lifestyle aspects (new café villages, recreational facilities).

For more info, visit www.mcgrath.com.au