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A shortfall in housing supply across Australia's housing market could trigger a surge in property values, with a number of in-demand suburbs primed for 7 per cent house price growth.
The forecast mirrors the sharp rebound in market sentiment which has been reignited by lower interest rates, a relaxation in lending policies and improved housing affordability.
Australia's housing market, which has been in recovery since bottoming out in May of last year, lifted by 4 per cent over the last quarter with returning buyers buoyed by signs of stimulus in the market creating the fastest gains since November 2009.
According to analysis by the property researcher Selection Residential Property's SuburbGrowth, median house prices across select Australian suburbs could now rise by between $100,000 and $200,000 over 2020 due to higher demand relative to limited supply.
While the majority of suburbs with the highest forecasted growth are located in Sydney, the suburb where median house prices are expected to climb by 7.5 per cent is Tasmania’s second largest city Launceston in the suburb of St Leonards.
Hobart has witnessed a 35 per cent increase in house prices over the three years to September due to an influx of mainland buyers, predominantly from Melbourne and Victoria looking to invest—pushing the city's vacancy rate to 0.6 per cent.
Hobart's inner-city suburbs of Rosetta and Berriedale are also tipped for 6.7 per cent growth with median prices of $423,000 and $339,000 to grow by $28,000 and $23,000 respectively.
Some smaller cities, including Newcastle and Adelaide, could also see market conditions improve due to rising population fuelling housing demand and relatively healthy housing affordability.
Like a number of its fellow beach suburbs in Sydney’s east, the high demand market of Bronte has forecast median house price growth of 7 per cent over the year.
The ritzy suburb, which revolves around Bronte Beach and Waverley Cemetery, is located about 36 kilometres south of the city.
The suburb’s median house price is $3,127,000 which is forecast to grow by about $219,000 over the next year, according to SuburbGrowth.
Neighbouring suburbs such as Kensington and Pagewood could also benefit from a potential growth knock-on.
The suburb of Allambie Heights, part of the Sydney's Northern Beaches region, is known as one of countless "war veteran suburbs" that were developed after World War II as a result of crown land releases.
Located 17.5 kilometres north-east of the Sydney and a short drive away from the coastline, the combination of seclusion and geographical convenience has begun to attract more-affluent buyers over recent years.
The suburb, which is considered by many to be significantly more affordable than nearby suburbs such as Balgowlah Heights and Seaforth, benefits from access to numerous parks, reserves and an abundance of trees.
The suburb’s median house price is $1,402,000 which is forecast to grow by about $98,000 over the next year.
Adelaide's housing market, which finished on a high note last year lodging a 1.4 per cent uptick over the quarter, has seen an increase in up-sizers looking to take advantage of the cities clean beaches, beautiful coastlines and homes offering great value for money.
The industrial suburb of Hendon, located centrally in the western suburbs of Adelaide, sits 9.8 kilometres from the city centre—within close proximity to the cities coastline.
The suburb’s median house price is $400,000 which is forecast to grow by about $28,000 over the next year.
The regional suburb of Booragul, located 21 kilometres south-west of Newcastle, is also expected to lift with home buyers and investors looking further afield for opportunities.
The suburb's rising population is anticipated to rapidly shrink the market's supply and escalate demand over 2020.
The regional suburb sits within a commutable distance to the state's second biggest city—30 minutes by train or road.
The suburb’s median house price is $402,000 which is forecast to grow by about $29,000 over the next year.
Davidson, located 20 kilometres north-east of the Sydney, sits adjacent to Belrose and Frenchs Forest and is located on the eastern edge of the Garigal National Park along the cities northern beaches.
The suburb, which started out as a mining quarry, did not see residential development until the 1980s.
As a relatively small suburb, with approximately 400 houses, it holds one of the highest rates of home ownership in Sydney and remains tightly held.
Rounding out the top five is Heathcote in Sydney, about 36 kilometres south of the city, which has forecast median house price growth of 7.1 per cent over the year.
Heathcote, which is also located in the Sutherland Shire, shares two of its borders with national parks, one of which—Heathcote National Park—was closed recently due to extreme fire danger across NSW's southeast.
“Long-term, the Sutherland shire will eventually run out of vacant land as the area is bordered by river and sea,” Sheppard said.
“This places it in good stead for continued growth compared to other fringe Sydney suburbs to the south-west and north-west where large land releases could counter demand.
“For example, despite all the stimulus the new airport will provide to Badgerys Creek and surrounding suburbs, there’s an enormous amount of vacant land that can be filled to subdue price growth.”
The suburb’s median house price is $836,000 which is forecast to grow by about $60,000 over the next year, according to SuburbGrowth.com.au.
Number four for forecast median house price growth is Birkenhead in Adelaide, where median house prices are tipped to grow by about 7.3 per cent over the period.
The suburb’s median house price is $403,000 which could increase by $29,000 over the year.
“Birkenhead is located on the Lefevre Peninsula so its borders feature reaches of the Port River,” Sheppard said.
“On top of that, it is only about 14 kilometres from Adelaide’s city centre, making it an easy commute for homeowners or renters in the area.”
A case in point was the Canberra-Queanbeyan suburb of Crestwood, with forecast annual median house price growth of 7.3 per cent expected over the 2020.
Its median house price is currently $481,000 and could increase by $35,000 over the next year.
“Crestwood is located within an easy commute of Canberra however, its median house price is significantly more affordable than our nation’s capital,” Sheppard said.
The second-best location for forecast growth over the year is Bangor in the Sutherland Shire of Sydney.
While scoring the same percentage growth forecast, at 7.5 per cent, the suburb slid down the rankings due to a slightly inferior demand to supply ratio.
However, analysis of the suburb found that Bangor’s median house price could increase by $76,000 over the year.
“About 28 kilometres south of the city, Bangor has a relatively affordable median house price, in Sydney terms, as well as being located near the Georges and Woronora rivers, which makes it an attractive proposition for both homebuyers and investors,” Sheppard said.
The analysis found that the number one location for forecast median house price growth in 2020 is St Leonards in Launceston in Tasmania.
Its median house price is tipped to increase by 7.5 per cent this year, partially because of strong demand versus supply.
The suburb currently has a median house price of just $269,000.
“While it’s only located about 10 minutes from the centre of Launceston, St Leonards offers a mix of residential and semi-rural homes, with an affordable price tag to boot,” Sheppard said.
While highly desirable and tightly-held, Sheppard told The Urban Developer that a long-term strategy would be more in keeping with a number of different approaches for investors aiming to exploit newly-created opportunities in residential markets.
“As an investor I would not put my money into St Leonards for a couple of reasons.
“Firstly, there’s too much land that could be developed there. Although there could be excellent growth over the next year, there’s risk of supply escalating in the future to balance out with demand.
“Although it may not happen in the next few years, long-term there’s potential for a problem.
“Once demand does tear away, developers usually respond to that and restore balance. I’d prefer a location where that is unlikely to happen at least in the next 5 years.”
This article was first published on the urbandeveloper.com