Cheap Sydney suburbs you should buy in before prices surge

Another wave of property price growth is set to lift prices above their already inflated sums in Australia’s most expensive city, with cheaper suburbs set to lead the upward charge in values.

Sydney has been declared one of the best locations in the country to buy a home right now due to the higher chance for value growth.

Another wave of property price growth is expected to lift prices above their already inflated sums and buyers who get in ahead of the surge may pocket quick equity gains, a new report has revealed.

The study by comparison group Canstar, powered with Hotspotting data, ranked Sydney the third best market for buyers around the country, ahead of the Gold Coast, Melbourne, regional NSW and Perth, among others.

It also identified 10 cheaper Sydney suburbs set to lead the upward charge in values because of growing buyer appeal and improving infrastructure.

Sydney suburbs flagged as “rising stars” included western enclaves St Marys, Casula, Guildford, Minto, Padstow, Mt Druitt and Westmead.

Stephen Michaels, with partner Magdeleine and son James, sold a home in the Padstow area, one of the markets flagged as a “rising star”. Picture: Richard Dobson

Others were inner west suburbs Ashfield and Newtown, along with Penshurst in the St George region.

The report factored in supply levels, buyer demand trends, economic factors like infrastructure spending and a variety of other metrics.

It comes as separate Oxford Economics modelling showed Sydney’s median house price was on track to hit $2m by 2027 due to current growth drivers.

Hotspotting research director Terry Ryder said Sydney home values had more room to grow than many other capitals and regional markets, despite already having some of the highest prices in the world.

Part of the reason was that Sydney was more sensitive to interest rate movements and an anticipated cut in interest rates later this year would unlock more buyer demand, Mr Ryder said.

Housing supply remained an issue in most of the Sydney market and new homes were not being built fast enough to meet demand, a factor that had already pushed prices upwards 8.3 per cent over the past year.

The report compared major markets around the country and ranked their growth prospects. Source: Canstar/Hotspotting.

“The dominant factor is an imbalance between supply and demand,” Mr Ryder said.

“Demand remains strong in Sydney despite affordable issues and the expensive nature of the market. (Sydney) has high levels of wealth so there is a capacity to pay more.

“Another thing is that Sydney has had a greater uplift in sales activity than many other cities, including Melbourne. A rise in sales activity is usually followed by increases in prices. Infrastructure spending, which can also push up growth, is good, especially in Western Sydney.”

Sydney as a whole was benefiting from business investments and governments pouring millions into transport and education, Canstar’s Rising Stars report noted.

Canstar personal finance expert Effie Zahos said there was a growing FOMO sweeping the housing market.

“The sentiment out there is that rates will go south and there comes a feeling that by making it more affordable for people to get into the market, it will mean more people jumping into the market. A lot of people want to get in ahead of that,” Ms Zahos said.

Western suburbs Mt Druitt and St Marys were identified as key growth areas because they were some of the few areas where houses could still be snapped up for under $900,000, which was drawing new buyers.

Both suburbs were also benefiting from links to the coming airport at Badgerys Creek, along with gentrification initiatives.

Local Ray White agent Peter Diamanditis, who grew up in the area, said it was unrecognisable from a few years ago and still changing rapidly.

“It’s at the stage Paddington and Newtown were at in the 1970s,” he said, noting that those areas had been considered unappealing locations at the time, only to become highly sought after markets.

A two-bedroom unit in this Westmead complex on Bridge Rd is for sale at $559,000.

Mr Diamantidis said gentrification was rapid. “Government has really cleaned it up,” he said. “There used to be a lot of dysfunctional social housing, a lot of problems.

“They’ve done an excellent job of improving that. We now find most of our buyers from out of area and have recognised the better value. They come from places like the inner west.”

Another key market with similar features – more affordable prices and expanding infrastructure – included Westmead, which was evolving into a hub for medical workers and students, according to the Rising Stars report.

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The remaining markets on the Rising Star list tended to have more affordable housing relative to surrounding areas – especially for unit buyers, Mr Ryder said.

Stephen Michaels recently sold a home in the Padstow area, one of the suburbs flagged as a “rising star”, and said buyers could still get “so much more bang for their buck” despite recent rises.

“I think we got really lucky when we bought from a timing perspective. The prices in the area have slowly but surely crept up,” he said.

“We are seeing a lot of duplex homes going up … a lot of younger families are coming into the area getting newly built property in a pretty decent area,” he said.

Local agent Lush Pillay of LJ Hooker-Padstow said prices in the area were going up faster than the Sydney average because of the greater appeal among buyers priced out of inner suburbs.

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Originally published as Cheap Sydney suburbs you should buy in before prices surge