Sydney’s most undervalued suburbs revealed

These are the Sydney suburbs offering buyers bang for their buck with room for home prices to grow.

They may have some of the highest property prices in the country, but parts of Sydney have been deemed “undervalued” housing markets with room for prices to grow.

And many offer home seekers the added perk of better bang for their buck than similar neighbouring areas, according to a DSR Data investigation of Sydney’s top 20 most undervalued housing markets.

The research showed that undervalued suburbs were spread across the city, but tended to be concentrated in pockets of the northern beaches, eastern suburbs, inner west and St George area.

Suburbs considered particularly undervalued were Forest Lodge, in the inner west, Brighton-Le-Sands and Bexley North, in the St George area, and Denistone, in the northwest.

DSR Data analyst Jeremy Sheppard said undervalued suburbs were typically areas with a long history of sub-par growth coupled with a recent improvement in demand.

Eddie Dilleen, with wife Francesca and kids Aurora and Forrest, bought for properties in “undervalued” Greenacre. Picture: Tim Hunter

“It’s underperformance followed by green shoots,” he said, noting that some undervalued areas had large price falls last year and were now more accessible for budget conscious buyers.

“They’re suburbs where prices hit a peak and came down drastically in the last 12 months and you’d have buyers thinking maybe the properties are good value now,” Mr Sheppard said.

Other undervalued markets were “bridesmaid suburbs” – often areas with a history of being perceived as less desirable than their neighbours, but with similar housing and amenities, he added.

“These price differences seldom continue forever and eventually the suburb will catch up to its neighbours,” he said.

Anyone buying in these undervalued areas could benefit from rapid capital growth, Mr Sheppard added.

“You could see above average growth in the next few years, while it’s still comparatively better value for money.”

The DSR modelling provided exclusively to The Daily Telegraph examined how prices in each suburb compared with those for similar properties in neighbouring suburbs.

Areas were considered undervalued if house or unit prices were well below the same category of housing in neighbouring areas.

Additionally, the suburbs needed to have lagged growth in nearby areas and have seen little price growth over an extended period.

A large gulf in unit and house prices within suburbs was considered another indicator of “undervalue” in instances where units and houses were a similar size.

Coogee was considered undervalued relative to surrounding areas. Picture: NCA NewsWire

These indicators were then measured against the current balance of housing supply and buyer demand and only suburbs where demand was beginning to outweigh supply were included as “undervalued”.

Houses within inner west suburb Forest Lodge were ranked Sydney’s most undervalued properties, with prices well below neighbouring areas like Annandale and Glebe following slower growth over many years.

Local agent Matthew Carvalhlo of Ray White said some Forest Lodge houses were slightly smaller than in neighbouring areas but the suburb was otherwise “very similar”.

One difference was that the suburb had traditionally been “off the radar” of many buyers looking in the region, he said.

“It’s always been a lesser known suburb, although it’s been gaining more interest lately,” he said. “A decade ago, we had to advertise Forest Lodge listings as Glebe to get people to notice.”

This house in undervalued Forest Lodge recently sold $2.1m.

Greenacre, a Canterbury-Bankstown suburb on the edge of the inner west, was another suburb considered undervalued.

Local resident and buyer’s agent Eddie Dilleeen, who owns four properties in the suburb, said the price differences between the area and its neighbours were stark.

“Like anywhere, it’s got good pockets and bad pockets,” he said.

“We’re a minute drive from Strathfield. We’re near all the same shops and schools. Some streets have a similar feel, but the houses cost half as much.”

Mr Dilleen said there may have been a stigma towards the suburb that’s kept prices down, but this has been changing.

“I picked up an (investment) property for $1.28m in 2020. We did some renovations and had it revalued. It’s now worth $1.87m. The area is appealing for a lot of people because it’s so central.”

Pello agent Michael Dowling said Denistone was a hidden gem. “It’s one of the least searched suburbs online, but there’s incredible value,” he said.

“We often get buyers who have missed out at auctions in other areas for $3m, $3.3m, and they get a Denistone house for $2.5m or $2.8m. You are only five minutes away, it’s the same access to services.”

Many of the other undervalued property markets were coastal suburbs nearby other, pricier beach suburbs.

They included Coogee, where houses prices were an average of about $2m-$3m cheaper than in Bronte and Tamarama, despite offering a similar beach lifestyle.

Another undervalued beach market was Brighton-Le-Sands, where prices were $200,000-$500,000 cheaper than in nearby Monterrey, Ramsgate and Sandringham.

The suburb tended to have smaller houses and more traffic than the beaches to the south, but was better connected by public transport and agents said the lifestyle was similar.

It comes as PropTrack data showed Sydney’s housing market has been recovering from a year long slump, with home prices rising 1.68 per cent over the last four months.