A Qld property investor has named his three best and worst Brisbane suburbs to sink money into post-pandemic, with a few “sure thing” areas now on the ‘avoid’ list.
PK (Pulkit) Gupta, who owns 12 properties – four of which are in Brisbane, one on the Gold Coast, one in Cairns and the rest elsewhere including interstate – believes investors will still be drawn to major buying opportunities in Qld given its high rental yield and strong affordability.
“The land tax is obviously something that puts Qld in a black spot for interstate investors especially, but in some locations if you take a medium to long term view this additional land tax is immaterial,” Mr Gupta said.
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He said suburbs where townhouses and villas hadn’t performed as well over the last few decades were now among the hottest properties among househunters, especially suburbs close to employment hubs.
“I think the better opportunity is more in the townhouse dwelling types, not so much inner city but 10-15km north and south of the river. Places like Clayfield, Northgate, Taigum, I think they will outperform because of the land component, good value of land as proportion of dwelling price. They will outperform units in the city, and also land is scarce.”
His most recent purchases have been in Brisbane and Gold Coast over the last year and a half.
“Just a year or two ago, Sydney and Melbourne buyers looked at freestanding houses in the Gold and Sunshine Coasts as absolute bargains. Townhouse varieties for people moving are still around $500,000 which is absolutely cheap. In Northgate the median is $1m for a house, and a townhouse is half of that.”
Controversially, he has picked a normally safe bet for investors – investor units in university suburb Toowong close to inner Brisbane – as his worst investment choice right now.
He said despite Toowong having great facilities, infrastructure and the University of Qld being a great source of tenants, its “attached housing” or unit market was oversupplied.
“The amount of unit construction underway in Toowong is enormous,” he said. “Unit prices have only gone up 2.2 per cent in the past 12 months, while house prices rose 24.4 per cent during the same period. That speaks volumes about the demand/supply imbalance of units. And they just keep building units in the area. I don’t see much potential for units to increase in value here at all.”
His second worst suburb pick was Burbank/Chandler which he feels may be in for a period of flat capital growth despite being 13km from the CBD and dominated by low-density and acreage housing.
“Most of its gains have been made in the past three years so it’s in for a prolonged period of flat, or even regressive, price movements. The slowdown is already underway. Rental yields are low at just two percent and days on market have risen from 50 days to 100 days in just a few months.”
Mr Gupta said acreage housing demand surged during the pandemic which was reflected in the area’s strong capital growth of more than 50 percent in the past three years.
“However, it’s not an area that will see ongoing demand at this post-pandemic level. I would expect a location like this to see an average capital growth rate of around five to seven percent over the long term.”
Despite the drive to affordability, one of Greater Brisbane’s most popular value suburbs Woodridge was the third area named in his worst investment list now.
“The big problem for Woodridge property is that the suburb is dominated by tenants,” he said. “Around 65 to 70 percent of all households are renting. This is fine when a rental boom is underway, but if measures are taken to ease the housing crisis, Woodridge will suffer greatly.”
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“As vacancies rise in the future, landlords will be competing against each other to attract
tenants – and there will be a lot of property on the market. Most of Woodridge’s value gains have been made in the past three years. Its prices will flatten and could quite reasonably be expected to soften in the medium to long term.”
Mr Gupta’s three best investment suburbs were all in Brisbane’s northside and all involved townhouses – Taigum, Northgate and Clayfield. Realestate.com.au listings show 32 townhouses for sale in those three suburbs, almost half of which are under contract.
“The price difference between townhouses and detached homes has grown substantially (in Taigum),” he said. “House values have risen considerably in the past 12 months with the median price of approximately $600,000 for a detached dwelling. In comparison, units and townhouses have a median of approximately $400,000. This is a huge disparity. I expect the value gap between them to close in the medium term.”
He said townhouses were the most likely to rise in value as affordability drove more homeowners and investors away from houses.
“Those who invest in townhouses here will see excellent value growth over the coming year or so. Taigum has had a stigma as a low socio-economic area, but if you purchase the right kind of property this suburb will deliver excellent price-growth potential regardless.”
In Northgate, the big driver was gentrification, he said, with townhouses offering the best buying potential right now.
“I’d even say Northgate is Brisbane’s ‘hidden secret’ when it comes to investment. The demographic is shifting solidly away from blue-collar workers and towards upwardly mobile young professionals.”
“I think the prospects for this area continue to get better and better. Again, townhouses offer the best potential at present. The median townhouse price sits at $450,000 compared to detached houses at $1m. Buyers are sure to recognize the excellent value townhouses offer relative to detached houses, and this gap will close rapidly.”
He also named Clayfield townhouses as one of his three best investment options, saying their median price of $500,000 was “sure to attract both homebuyers and investors” to a suburb which was “very accessible” with popular schooling choices, retail outlets and lifestyle options.
He said Brisbane’s real estate markets were a “complex tapestry” with some “still at the start of their growth cycle for certain types of properties, so the long-term upside is excellent”.