When it comes to property investing, location is king.
But how do you pick the best from the rest or know when a good suburb has gone bad?
Jeremy Sheppard, head of research at property site, DSR Data, uses a tool he developed called Location Score, which ranks Australia’s best and worst performing suburbs for investors.
The tool takes into account factors including auction clearance rates, vacancy rates, renter-to-owner ratio and rental yield to assign suburbs a score between 0-100, where 50 is a flat and anything above 62 is considered a ‘growth’ market.
“Of the 30,000 plus Australian property markets, half of them have a Location Score in a narrow range between 50 and 61,” he explained. “Most markets spend their time in a state of balance, where supply matches demand.”
This year, many of the worst performing suburbs have been in NSW, with the 10 lowest in ranking all located in Sydney, according to his research.
Sydney suburbs such as Mascot, Rosebery and Balgowlah have seen their scores fall by at least 10 points in the last 12 months, thanks to rising unaffordability and a jump in supply, according to Sheppard.
He said suburbs around Sydney have been particularly impacted by the “sudden and dramatic increase” in the number of apartments now on the market.
“Interestingly, all of them are unit markets. This highlights how easy it is for unit markets to become over-supplied,” he said, referring to the worst performers.
At the other end of the spectrum, the suburbs with the highest location scores (above 80) were all house markets and were located mostly in Canberra, Victoria and Tasmania.
Based on his analysis, Sheppard picked out the 10 best and worst performing suburbs based on their performance over the last 12 months.
Top ten suburbs by location score
- Charnwood, ACT
- Glenorchy, TAS
- Howrah, TAS
- Whittington, VIC
- Macgregor, ACT
- Grovedale, VIC
- Mount Evelyn, VIC
- Dunlop, ACT
- Newcomb, VIC
- Evatt, ACT
Good suburbs gone bad
- Mascot, NSW
- Caringbah, NSW
- Tempe, NSW
- Glenhaven, NSW
- Balgowlah, NSW
- Mount Colah, NSW
- Leichhardt, NSW
- Eskineville, NSW
- Rosebery, NSW
- Penrith, NSW