Brisbane’s overvalued and undervalued suburbs revealed

New research has revealed Brisbane’s overvalued and undervalued suburbs and it could save you over $400,000 by moving your search just a few streets away.

Buyers hoping to crack the inner-city market should look to Fortitude Valley, where the typical dwelling value is $500,000 thanks to the grunge suburb’s unit-heavy market.

Research by SuburbData shows that buyers could save $406,000 in the nightclub hub compared to neighbouring suburbs such as the Brisbane CBD, Newstead and Teneriffe.

The current median unit price in Fortitude Valley is $550,000 compared to $967,500 at Teneriffe, according to the latest REA Market Trends report.

Dwelling value refers to the median price across detached houses, townhouses, units and villas.

SuburbData director Jeremy Sheppard said those who purchased in “undervalued” suburbs could look forward to rapid capital growth as better value for money attracted more buyers and increased competition for property.

Overvalued suburbs offered a higher risk of new homeowners having to wait years to get growth on their investments, he said.

An area was deemed undervalued if prices were lower than in neighbouring areas – without a reason that could be explained by geographic differences, such as a lower lying location or a lack of coastal access.

Undervalued markets were also those where growth in real estate values had been lacklustre over a lengthy period, with this period coinciding with sharp rises in values across nearby markets.

Another critical ingredient in the local market was a recent shift in supply and demand, with buyer demand beginning to outweigh the supply of property sales, indicating rises in values were imminent.

Across Brisbane, the suburbs where buyers could save the most by switching suburbs were strong townhouse and unit markets, and included Alderley ($113,000 below neighbouring suburbs), Clayfield ($133,000), South Brisbane ($228,000) and Hamilton ($188,000).

Detached houses in those inner-city suburbs often command prices in the seven figures.

But it was the family-friendly suburb of McDowall that came in as the most undervalued suburb based on a number of key metrics – typical dwelling value compared to the Brisbane average, demand to supply ratio, price compared to neighbouring suburbs and its potential to see a ripple effect in value.

The research found that the typical dwelling value in McDowall was $937,000 – $9000 less than its neighbours.

Stone Real Estate agent John Bradley said the main buyers in McDowall were families trying to get into the sought-after school catchment.

“I had two buyers who bought houses off me and they are renting them out until their children start school,” he said.

“There is literally nothing on the market.

“One I had recently had 40 groups through and seven offers, while another had 60 groups and 10 offers.”

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Norman Park was the second most undervalued suburb, with a typical home value of $1.1 million – $66,000 below that of its closest neighbours, which includes Seven Hills, Coorparoo and Camp Hill.

Also making the top three most undervalued suburbs was Mitchelton, where the typical home value is $884,000, $36,000 less than neighbouring suburbs.

Denovans Real Estate agent Robbie Cornish said that Mitchelton was a family-friendly suburb that was undervalued compared to suburbs such as Alderley and Ashgrove.

“It is a bit further out but only marginally,” he said, adding that the suburb often offered larger blocks.

“There is plenty of interest from people priced out of neighouring suburbs, so it is benefitting from the flow-on effect.”

Rounding out the top five most undervalued suburbs were Kedron and Wavell Heights.

Many of Brisbane’s most overvalued suburbs were premium lifestyle suburbs that neighboured locations still undergoing gentrification.

Tallegalla, an acreage suburb in the Ipswich region, came in top spot with a typical dwelling value of $1.1 million – $37,000 above neighbouring suburbs such as Marburg, Minden and Rosewood.

It was followed by Samford Valley, known for its luxury acreage, with a typical home value of $1.8 million – $101,000 above its neighbours.

Houses in Arana Hills, just 15.5km away, have a median value of $1.01 million.

The other top five most overvalued suburbs compared to neighbouring suburbs were Park Ridge South ($74,000 above), Stockleigh ($43,000) and Newtown ($97,000).

“It may take a while till you get any growth on your investment in an overvalued suburb,” Mr Shepherd said.

“Usually prices will then level out over a few years but buying at the peak of a fast moving market could even mean, in extreme cases, that prices soon fall.”

Mr Sheppard said knowing which markets were undervalued or overvalued was important in the current climate given how significant prices had become.

“Homes have become such an enormous investment. Prices have become so high that value growth has become important for everyone buying, not just investors,” he said.

“Buyers are continually searching for value for money and that drives cycles in each suburb. “One of the big mistakes people make when looking at markets is assuming growth will occur at a consistent rate over many years.”

Mr Sheppard said Brisbane as a whole could soon peak and become overvalued, although he noted that it was not as close to that point as Adelaide and Sydney were.

“It is not quite there yet,” he said. “It’s not at the peak, but it’s reached a point where there may be less growth than in other markets.

“It’s certainly not undervalued, which it once was.”

He noted that a retraction in citywide values seemed highly unlikely any time soon – especially with interest rate cuts on the horizon – but there were signs the market was “running out of puff”.

Mr Sheppard said growth in Brisbane values may slow because the market was reaching a point where affordability constraints were starting to have an effect.

It was a different story for the major regional centres in northern Queensland, Mr Sheppard said.

“Some regional areas in Queensland have had good recent price growth but they are still undervalued, such as Townsville, Rockhampton and Gladstone.

“A lot of those areas have only just reached the point where buyers will say ‘let’s go here, it’s cheaper’. These markets are still in a catch up phase.”

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UNDERVALUED SUBURBS

(TYPICAL HOUSE VALUE/RIPPLE EFFECT POTENTIAL)

MCDOWALL $937k $9000 below neighbouring suburbs

NORMAN PARK $1.1m $66,000

MITCHELTON $884k $36,000

KEDRON QLD $956k $46,000

WAVELL HEIGHTS $960k $5000

ALDERLEY $830k $113,000

CALAMVALE $808k $18,000

GRACEVILLE $921k $30,000

CORNUBIA $894k $7000

KURABY $744k $26,000

CLAYFIELD $880k $133,000

SOUTH BRISBANE $830k $228,000

FORTITUDE VALLEY $500k $406,000

SHERWOOD QLD $920k $24,000

ROCHEDALE $896k $5000

YERONGA $867k $41,000

NEWPORT $974k $22,000

HAMILTON $880k $188,000

EIGHT MILE PLAINS $669k $61,000

BRIDGEMAN DOWNS $864k $17,000

OVERVALUED SUBURBS

TALLEGALLA $1.1m $37,000 above neighbours

SAMFORD VALLEY $1.8m $101,000

PARK RIDGE SOUTH $1.3m $74,000

STOCKLEIGH $1.2m $43,000

NEWTOWN $869k $97,000

WILLAWONG $1.2m $103,000

SHORNCLIFFE QLD $1.7m $184,000

HILLVIEW $585k N/A

EBENEZER $1.1m $63,000

KALINGA $2.0m $250,000

MARBURG $858k $5000

CEDAR VALE $1.1m $30,000

MOODLU $1.2m $82,000

BLACKSTONE $749k $20,000

MOUNT MORT $678k N/A

INNISPLAIN $1.2m $106,000

TENERIFFE $3.5m $250,000

VERESDALE $1.2m $44,000

UPPER BROOKFIELD $2m $105,000

WIGHTS MOUNTAIN $3.5m $250,000

(Source: SuburbData)

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