Sydney and Melbourne suburbs with highest growth potential as rates rise

With rates on the rise, Australian house prices could plunge by 20 per cent. But some suburbs will weather the storm better than others.

With interest rates on the rise, many Australian homeowners are understandably concerned about what the future value of their property will look like.

Experts have warned Australian house prices could plunge by 20 per cent, with Sydney and Melbourne tipped to suffer the biggest slide in four decades.

Investment bank Jarden warns we may see the biggest property market plummet since 1980, with the Reserve Bank of Australia now expecting inflation to hit seven per cent by the end of 2022 for the first time in 32 years.

Such a scenario would mean a $270,000 plunge in Sydney’s middle house price by next year as Melbourne values dived by more than $191,000.

But some suburbs will weather the storm better than others.

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Some suburbs are predicted to do much better than others in the coming years.

Comparison site Finder’s new Property Investment Index has pointed to the Sydney and Melbourne suburbs its analysts believe will fare the best over the coming years.

They used a range of data inputs to predict price stability in each suburb across Australia’s major cities, including Sydney and Melbourne, with Brisbane, Adelaide, Perth, and Hobart to be published next week.

The index shows houses in Sydney’s Cammeray, Redfern, and Wahroonga have the highest potential for price stability.

In terms of apartments, Waverton, Rozelle and Paddington are predicted to hold their value better than anywhere else in the city.

In Melbourne, houses in Alphington, Aberfeldie, and Carnegie show the highest potential, according to the index, while Aberfeldie, Yarraville and Mckinnon are the best places to buy an apartment.

You can see a breakdown of why Finder thinks these suburbs are so strong in the tables below.

Sydney’s Cammeray, Redfern, and Wahroongahave the highest potential for price stability.

In Melbourne, houses in Alphington, Aberfeldie, and Carnegie show the highest potential.

Suburbs are scored out of 100, with a high score indicating very high predicted performance and 0 indicating very low or negative market performance.

The final score is calculated based on three factors: market demand, population change (including income, income growth and unemployment), and property (historical property price growth and current prices).

Graham Cooke, head of consumer research at Finder, said the Property Investment Index is intended to be an indicator of relative market strength, rather than of property prices themselves.

“The top performing suburbs in the index are those that are most likely to hold their value, rather than suddenly increase in price,” he said.

“Our index is intended to highlight potential suburbs in your investment area that may be worth a closer look.”

Interestingly, half of Sydney residents (50 per cent) expect property prices in their local area to increase in the next 12 months, according to Finder’s Consumer Sentiment Tracker.

In Melbourne, over half of residents (56 per cent) expect property prices in their local area to increase in the next 12 months.

Many property owners still expect the value of their homes to increase. Picture: NCA NewsWire / John Gass

Mr Cooke said property investment was one way to build your wealth.

“While property is generally considered to be a less riskier asset compared to other options such as shares, like with any investment, it carries a certain degree of risk – especially in the current market,” he said.

“Before taking the plunge, you need to carefully evaluate the benefits and risks to decide whether or not it will be a viable investment for you.”