Capital cities have a mix of suburbs where homes are undervalued and other areas where they are likely overvalued.
Australia’s most undervalued and overvalued suburbs have been revealed, exposing areas where prices have either overshot the mark or remain lower than they should be and are due “catch up” growth.
Research from SuburbData showed most the overvalued and undervalued suburbs had varying history, but they were characterised by recent changes in supply and demand.
This was coupled with major price differences between neighbouring areas with comparable housing.
SuburbData analyst Jeremy Sheppard said overvalued suburbs offered a higher risk of new homeowners having to wait years to get growth on their investments, while those buying undervalued markets may get imminent equity growth.
“It may take a while till you get any growth on your investment in an overvalued suburb,” he said.
“Usually prices will 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.
Undervalued and overvalued suburbs differed across our major capitals:
MELBOURNE
See full list of top 20 most overvalued, undervalued Melbourne suburbs
Melbourne as a whole was declared “tremendously undervalued” and was due for stronger citywide price growth.
Some of the most undervalued pockets of Melbourne included suburbs where prices had been kept down over many years by a slew of investment property sales from landlords exiting the market.
Sales turnover has since slowed and the balance of demand and supply has changed – with areas like St Kilda West now among the most undervalued and beginning to pick up again.
Much of Melbourne is undervalued.
Whitefox chief executive and The Block judge Marty Fox said the relative affordability, especially the six-figure gap between St Kilda East and neighbouring areas, wouldn’t last long.
Other undervalued suburbs were Doreen, in the outer north, and Noble Park in the Dandenong area, along with a mix of suburbs in the Hume region and northwest Melbourne.
Mr Fox said Melbourne as a whole was bouncing back. “The gap between what buyers think property is worth and what it should be worth is the widest I’ve seen in years
SYDNEY
See full list of most overvalued, undervalued Sydney suburbs
Prices in Sydney’s most “overvalued” suburbs were up to $250,000 higher than nearby, similar areas – often after years of rampant growth that outpaced the rest of the surrounding market.
Such price gaps were unsustainable, according to the SuburbData research, with buyer demand now showing signs of dropping while the supply of available properties was soaring.
Sydney auction activity has been picking up. Picture: Adam Yip
Areas ranked among the 20 most overvalued Sydney markets were a mix of suburbs spread across the greater city area.
They included developing suburbs around the coming Western Sydney airport, along with pandemic-era boom markets like the upper northern beaches and outer suburbs dominated by acreages and semirural properties.
ADELAIDE
See full list Adelaide of most overvalued, undervalued suburbs
The Adelaide suburbs to target for future growth, and where to avoid to reduce the risk of overpaying, were a sharp contrast.
The most undervalued, the report highlighted was Thebarton, with a median house value of $837,000 – about $132,000 below its neighbouring suburbs.
Oakbank, Broadview, Clovelly Park, Camden Park, Cumberland Park, Brompton, Tonsley, Hove and Lightsview rounded out the top 10 most undervalued.
LJ Hooker Mile End/Woodville agent Thanasi Mantopoulos said he felt Thebarton still had plenty of room for growth.
“We’ve seen houses in neighbouring Mile End and Torrensville now consistently break the $2m mark … the current record in Thebarton is $1.64m for a three bedder.”
Vista, in the Tea Tree Gully council area, on the other hand, was identified as SA’s most overvalued suburb, ahead of Woodville, Taperoo, Leabrook and Wayville and others.
BRISBANE
See full list of most overvalued, undervalued Brisbane suburbs
The research showed buyers could save over $400,000 by moving their home searches just a few suburbs away, in some cases.
Brisbane prices have been rising at a frenzied rate for years, creating pockets of overvalue. Picture: Steve Pohlner
One of the suburbs offering the lowest prices relative to neighbouring areas was Fortitude Valley. Other undervalued suburbs were Alderley, Clayfield, South Brisbane and Hamilton.
Areas were deemed undervalued if prices were lower than in neighbouring areas – without a reason explainable by geographic differences, such as a lower lying location or a lack of coastal access.
Many of Brisbane’s most overvalued suburbs were premium lifestyle suburbs that neighboured locations still undergoing gentrification.
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