Choosing the right suburb for your first home: a buyers guide

By Alex Brooks

Where should you buy your first home? Australian Property Monitors head of research Yvonne Chan has come up with Sydney's top three suburbs in the east, west, north and south of Sydney that will deliver steady long term growth.

“I tried to identify suburbs that were affordable but also showed steady sales volumes to indicate that demand was strong,” she says.

All 12 suburbs have shown solid and consistent price performance over a 10-year period, ideally with minimal or no negative price falls and many have gross rental yields in excess of 4 per cent.

“First home buyers would need to balance affordability with long term prospects,” Chan says.

WHAT ABOUT AFFORDABILITY?

Sydney is the fifth most unaffordable property market in the world, requiring 8.3 times average income to buy a median-priced home in 2008 according to international agency Demographia.

Yet Fujitsu Consulting managing director Martin North says his research into mortgage stress shows there has been 30 per cent increase in the proportion of first home buyers who believe they can afford to buy property since the first home owner grants were announced last year.

With the Federal and NSW governments handing out up to $24,000 to first home buyers, rising rents and the Prime Minister’s announcement that the big four banks will offer 12-month mortgage payment “holidays’ for anyone who loses their job, it seem there is no better time to buy.

J.P. Morgan banking analyst Scott Manning says first home buyers are attracted by low mortgage rates and modestly declining house prices.

“It is worth noting that despite Sydney house prices remaining relatively flat over the course of 2008, the first home buyers’ average loan size has increased from $248,000 to $283,000,” he says.

New Australian Bureau of Statistics figures show lending to first home buyers reached 26.9 per cent of the market in February 2009 – the highest proportion since 1991.

Mortgage Choice corporate affairs spokesperson Kristy Sheppard says that banks are becoming stricter about lending and requiring three to five per cent deposit, but the 2009 First Home Buyers Survey found five per cent of first-time buyers will receive help from their family.

Of those buying with their parents, 65 per cent will make a joint purchase, 20 per cent receive a monetary gift towards the deposit and 15 per cent have the parents act as loan guarantor.

EAST

Mascot, 2008 median house price $615,000

Botany, 2008 median house price $625,000

Chippendale, 2008 median house price $650,000

The city and eastern suburbs are notoriously expensive with slim pickings for first home buyers wanting a house, typically a safer long term investment with higher land value than apartments.

“The activity amongst first home buyers definitely drops off for properties over $500,000 but we find some first home buyers are active up to $700,000,” says My Place Estate Agents’ David Mitford.

Chan says Mascot and Botany are two of the most affordable eastern suburbs that have shown solid and stable growth over 10-year periods.

“Botany has the highest long term growth, at an average of 7.5 per cent per annum over a 10-year average and has never shown any wild spikes up or down,” she says.

MGM Properties principal Michael Xyla says Mascot is cheaper than Botany, with semis priced from the low $500,000s and freestanding houses start at $600,000.

Botany has a wider variety of 1920s bungalows and single-fronted cottages but the most popular choice for first home buyers is the brand new townhouse developments.

“Everyone wants something new so they can maximise the grant to $24,000,” Mitford says, with new townhouses starting at around $650,000 while older townhouses sell for between $550,000 and $600,000.

“To be honest, they are probably better off going into a Torrens title house rather than a townhouse and avoiding all the strata fees.”

In Chippendale, the median price of $650,000 will buy a small terrace which would probably be unrenovated.

“Most of the houses in Chippendale are selling to second and third home buyers who can pay more than the first home buyers,” says L.J. Hooker Newtown’s Poh Ling Ee.

NORTH

Brookvale, 2008 median house price $638,000

Marsfield, 2008 median house price $500,000

Hornsby, 2008 median house price $550,000

Chan says that while many northern beaches suburbs came back in price between 2007 and 2008, Brookvale was one of the few suburbs that did not.

“It’s close to the industrial areas, but anyone looking for value near the beach can’t overlook Brookvale,” she says.

“Even when the rest of the market lagged in the northern beaches, it had 1.6 per cent price growth.”

Ratcliff Mathews Real Estate’s Tony Cimino says Brookvale offers excellent value and streets like Consul and Alfred roads are quiet and residential and sometimes have unrenovated homes in the $600,000s.

On the upper north shore, John Pye Real Estate’s Bec Pye says there aren’t enough low-priced houses coming on the market to satisfy first home buyer demand.

“When we get properties priced between $400,000 and $550,000 they are walking out the door and selling for fantastic prices on their first weekend open.”

Pye says an unrenovated house now starts at around the mid $400,000s in Hornsby, with first home buyers coming from the Hills District and other northern suburbs to snare their first home.

“Hornsby has good land sizes and a major train station that means it can take less than 45 minutes in peak hour to get into the city,” Chan says.

“I also chose Marsfield as a good first home suburb because the new Chatswood to Epping rail link will boost values in the area.”

First National Epping’s Allison Mifsud says Marsfield has around 40 per cent townhouses and 60 per cent freestanding houses, with freestanding houses starting at around $700,000.

Two bedroom townhouses in Marsfield – which are in easy reach of the new commercial office districts in North Ryde – sell for between $420,000 and $450,000.

“When townhouses in that price range come on the market, they are very popular with 80 groups coming through open inspections,” Mifsud says.

“We have to hold them back at the front door because they can’t all fit in the house – even at the peak of the market we never saw it as hot as this.”

SOUTH

Kingsgrove, 2008 median house price $562,000

Menai, 2008 median house price $598,000

Kogarah, 2008 median house price $598,000

“In the south of Sydney, I chose Kingsgrove and Kogarah because they have a train station and good transport will always offer value,” Chan says.

The sleepy suburb of Kogarah, which is only 14km from the CBD, offers the added bonus of showing long term growth over 10 years of seven per cent per annum.

“There is plenty of unit development in the area, which can make homes more valuable in the future because land values will hold up well,” she says.

Montgomery Real Estate’s Josh Miller says Kogarah is a well-regarded and tightly held suburb, without the sales turnover of nearby areas.
In Kingsgrove, older-style brick and tile houses on blocks of land around 500 square metres can be had from the low $500,000s, according to Century 21 Favorito Real Estate’s Anthony Favorito.

“The grants are definitely making people move, but I wouldn’t say it’s made prices over-inflated yet,” he says.

Further out in the Sutherland Shire, the leafy suburb of Menai made the list for its consistent demand and affordable offerings.

Ray White Menai’s Gavin Ottaway says prices in Menai have always remained steady as it’s one of the few Shire suburbs to offer value and modern homes built within the last 10 or 15 years.

“Most areas have really decrepit houses for first home buyers, but here you can get something that doesn’t need much doing to it,” he says.

WEST

Tempe, 2008 median house price $500,000

St Peters, 2008 median house price $546,750

Minto, 2008 median house price $267,000

There is an abundance of suburbs in the west and south-west of Sydney with affordable price tags and reasonable transport infrastructure for first home buyers.

The real challenge choosing suburbs west of the city is to find locations that offer reasonable long term price prospects, particularly since some outer suburbs suffered price falls of more than 10 per cent between 2004 and 2008.

Ray White Macarthur Group principal Mark Jennings says suburbs around Campbelltown like Eagle Vale, Ruse and Bradbury offer similar value to Minto, with a mix of 30-year-old homes on blocks of land between 500 and 800 square metres.

“Minto was a Housing Commission are but they have knocked down quite a lot of it so the area is still in the process of changing but it’s very affordable,” he says.

“Tempe and St Peters are the best picks because they are so close to the city and offer so much for comparatively low prices,” Chan says.

Both suburbs have train stations, but Agency by Glenn Regan’s Glenn Regan says St Peters remains more popular because it is closer to the southern end of Newtown.

“Tempe and St Peters are affected by aircraft noise, but those homes west of the Princes Highway and closer to Tempe station are a bit quieter,” he says.

Planet Properties’ Rosalie Gordon says Tempe is extremely popular as it’s one of the few suburbs within 8km of the city that has freestanding houses available for less than $500,000.

“They are pretty streets in Tempe, especially those near Tempe Station and you get more land and a better house than you would in Newtown,” she says.

WHAT FIRST HOME BUYERS SAY

“We were sick to death of paying rent,” says Nicole Marczan, 23, one of Sydney’s first home buyers who has just bought a three-bedroom duplex in Menai with her partner Matt Conroy,27, for $480,000 through Ray White Menai.

“Paying a mortgage is cheaper than paying the rent and saving for a house deposit – we are going to be better off.”

The couple, who both work in the Sutherland Shire, began looking for a house to buy after the grants were announced in October.

“We looked just before Christmas and started looking at units in Cronulla but then branched out to look at Engadine,” Marczan says.

She says Menai appealed because it had relatively modern houses that didn’t need complete renovation, whereas more established suburbs closer to the city could only offer rundown properties in their price range.

“It’s very competitive to buy something for under $500,000,” she says.

“The grant was a bonus and once we heard we could get $14,000 then we were pushing to find something before June 30.”

© 2007 Alex May