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Smaller capital cities are the standout performers in a ‘segmented’ market

The smaller capital city property markets of Adelaide, Perth and Darwin have been the standout performers from across the country, while Melbourne continues to struggle, according to a new report.

Hotspotting’s, Price Predictor Index Autumn 2023 found that the national market is currently “highly segmented” with the smaller capital cities and some regional cities still performing strongly compared to larger capitals.

The report showed some of the top performers over the past quarter include Perth, Adelaide and Darwin, as well as Ballarat, Canning, Gladstone, Kalgoorlie, Mackay, Palmerston, Salisbury, Stirling, Townsville and Wollongong.

While some of the weaker markets were Melbourne, Canberra and Brisbane as well as many of the high-profile sea change locations that featured prominently over the past few years.

Hottspotting Founder Terry Ryder said that while buyers had previously been chasing affordability, currently there were no strong themes running through the various markets across Australia.

“The reality is that markets are highly segmented,” Mr Ryder said.

“Capital cities have contrasting outcomes within their borders and individual municipalities commonly have a mix of rising, consistency, plateau and declining suburbs.

Mr Ryder said that while the top-end markets are weak in many jurisdictions, the opposite is true in Sydney where some of the prestige markets have shown signs of recovery. 

“The cheaper outer-ring locations have weakened noticeably in the biggest capital cities, but they remain solid in the smaller and most buoyant cities, including Perth, Adelaide and Darwin,” he said.

“Perth, Darwin and Adelaide continue to deliver strong sales activity and price growth, in contrast to the nation’s biggest cities.

“Regional markets are also still providing success stories, although it’s no longer the iconic sea change locations which lead, but hill change areas and smaller regional towns and cities.”

Perth and regional Queensland lead the way

Mr Ryder said Perth and Regional Queensland featured a number of suburbs in the top 100 that have solid upside potential.

“The strength in the Perth and regional Queensland markets means that 40 of the top 100 are in WA and Queensland,” he said.

“Signs of revival in parts of the Sydney market and some of the regional markets means that NSW provides 31 of the 100 locations. 

“With Melbourne among the weakest markets and regional Victoria steady, Victoria provides only 14 of the top 100. 

“SA is less prominent, with the regional areas weaker than before, while Tasmania barely features at all.” 

Mr Ryder said some locations in Perth are performing well led by the City of Stirling, which was his top pick.

“The City of Stirling, in the mid-northern suburbs of Perth, seems to perform well in all kinds of markets because of its location, transport links, shopping facilities, educational amenities and lifestyle features, including extensive parkland, golf courses, and beaches, ” he said.

“Indeed, Greater Perth is divided fairly evenly into thirds: one-third of suburbs have rising sales activity, one-third have steady sales, and one-third are plateau markets where sales have tapered off and settled at a level below the peak.

“To have two-thirds of locations maintaining strong buyer demand is exceptional in the current climate of economic disruption.”

Hotspotting Founder Terry Ryder.

Mixed bag for Sydney

Mr Ryder said there is evidence of recovery in some sections of the Greater Sydney market, while overall the situation has remained steady compared to the two previous quarters, and is considerably stronger than the pre-Covid downturn of 2018/2019. 

“But the Greater Sydney market is still very segmented: there are suburbs where sales activity is trending upwards and many with steady and consistent buyer demand, but a greater number of suburbs where sales activity remains quite weak,” Mr Ryder said.

“Perhaps the most pertinent observation is that, after the Sydney market dropped markedly in the March 2022 quarter, it improved in the June 2022 quarter and has remained steady since then. 

“This overall steadiness and absence of marked deterioration perhaps explains why some research sources have recorded better price data for Sydney in the early part of 2023.”

Affordable inner city locations in demand

Mr Ryder said buyers are still targeting more affordable homes, in particular, inner-city areas that offer affordable apartments. 

“Melbourne and Brisbane both have weak markets overall, but their near-city precincts are among their best performers,” he said.

“If a well-located suburb has apartments at half the price of houses, or less, then it’s likely to have solid to strong demand from buyers. 

“Rental demand is strong also and the return of migrants and overseas students in good numbers is likely to keep interest in these areas high in 2023.”

Mr Ryder said the one word that sums up the current property market is “consistency”.

“Many markets across Australia have recorded fewer suburbs with rising sales activity, but a greater number of locations with steady buyer demand,” he said.

“This means that, while sales activity is not rising in these areas, it has maintained at solid and consistent levels. 

“Locations that deliver consistent demand are among the best markets for investors, as steady buyer activity over time tends to produce good price growth. 

“Market areas with record numbers of consistency markets include Adelaide, Perth and the regional markets of Queensland, Victoria, NSW and WA.” 

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.

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