In 2018, the projected five-year difference in capital gains between $1 million of property in postcode 2100 on Sydney’s Northern Beaches, compared with $1 million in a high-growth area is $487,614 according to Residex data.
Over eight years that figure is forecast to be a whopping $679,271.
With Sydney coming off an extended growth period, most experts agree there will be minimal capital gains throughout much of the city for the next five to eight years.
Specifically, Residex forecasts that postcode 2100 – which comprises North Manly, Brookvale, Beacon Hill, Allambie Heights and Oxford Falls – will see growth of around 1 per cent per annum over the five years to 2022, and 2 per cent per annum over the eight years to 2025.
In contrast, some suburbs in Southeast Queensland are forecast by Residex to see capital gains of 8 to 9 per cent, per annum, compounded over the next five to eight years.
That equates to $538,624 in capital gains on $1 million of property over five years, compared with $51,010 of gains for the $1 million of property in postcode 2100. Over eight years it amounts to $850,930 compared with $171,659 in 2100. These figures do not include rental income.
There are clearly huge differences between the two markets. One will see you create significant wealth and the other will see your investment perform no better than cash in the bank.
Why Southeast Queensland?
There is a wonderful growth corridor from the New South Wales border north to the Sunshine Coast, fueled partly by strong internal migration. 2016 forecasts by Infrastructure Australia state there will be an additional 1.4 million people living in Southeast Queensland within 15 years requiring an extra 700,000 homes.
The resulting construction and economic boom is backed by tens of billions of dollars flowing into infrastructure projects such as universities, schools, hospitals and healthcare, roads, public transport and airport upgrades – including Brisbane’s $1.35 billion airport upgrade.
Picking Specific Suburbs
It is no secret that much of Southeast Queensland property is forecast to boom in value, however there are still suburbs or asset types that should be avoided, while others are forecast to exceed average growth by 2 to 4 per cent per annum, compounded.
It is the role of inSynergy’s research team to know where the high performers are and where should be avoided.
Pockets of Southeast Queensland are not the only areas with such strong forecasts. Some suburbs in Canberra, Newcastle and the Hunter Valley region are also forecast to boom in similar manner.
We know this because our relationships with globally respected research firms enable us to identify key areas where the stars have aligned for the best possible capital growth outcomes.
The difference between two neighbouring suburbs can come down to better infrastructure or more favourable zoning, or a certain street may be closer to major transportation hubs, have a better aspect, views, services, streetscapes or demographics.
We trawl the data for all the signals and characteristics in a location which will see it outperform the others.
About our Research Sources
inSynergy invests heavily in the research and data it uses to feed property investment recommendations.
Relationships with Residex (owned by Core Logic who also own RP Data) and Hotspotting provide access to raw data and deep insights on regions and specific suburbs, while other sources include BIS Oxford Economics (formerly BIS Schrapnel), Herron Todd White, KPMG and Urbis.
There are significant costs for this qualitative and quantitative data. These are global organisations who are drawing upon entire economic forecasting divisions and industry experts.
We then spend time extrapolating and analysing that data, filtering out the noise. That is the role of the research team.
It is this broad spread of research which underpins our authority on determining where we see the most dynamic growth potential.
How to make this $1-2 million better off:
This is all great for one property but remember our strategy is usually to reuse any equity gains we make once we have enough equity to invest safely in another property.
If we did that in this case we could probably buy another 1-3 properties in eight years with this equity growth. So, your total return could end up being $1-2 million better off than Sydney in the eight-year period because you’d have 2-3 properties growing at roughly that rate. Imagine what you could do with another $1-2 million in eight years!
Get in touch for a free one-hour property investment consultation, tailored to your individual circumstances.
Important Note and Warning: This information is general in nature and should not be considered personal tax advice. We highly recommend you discuss these concepts with your accountant, property investment adviser and investment finance mortgage broker jointly to ensure any considered concepts are suitable for your personal financial situation, as one effect of the concept may negatively impact another part of your plan.