Another reason not to invest in the outer suburbs

Invest in medium density properties in the inner and middle ring suburbs of our 4 big capital cities!

If you’ve been following my blogs you’ll know that’s what I’ve been recommending for years and years. neighborhood-1104497_1920

When others were suggesting investing in the “hotspots” of mining towns, I stuck to my guns.

When others were suggesting invest in regional Australia, I kept said that the inner and middle ring suburbs of our big cities were the places to invest.

Sure there have been short-term opportunities outside my preferred safe investments zones, but I’m not looking for the next hotspot or a get rich quick scheme, I don’t like speculating.

I’ve also suggested to avoid the outer suburbs which tend to be more dominated by young families, warning that these are not good investment locations because of lack of scarcity and the demographics in the area – young families, many who are struggling to make ends meet.

Now this is not a  judge of people – it’s just a fact that most families in these areas are more interest-rate sensitive, petrol price sensitive and this means values in the outer suburbs are less likely to increase as much as the inner and middle ring suburbs where there is better infrastructure and amenities.

And these are the areas that will suffer more when interest rates eventually rise  


Last year a survey gave another reason not to invest in the outer suburbs. 

Almost one in 10 families living in Melbourne’s outer growth suburbs could not afford food at least once over the past year  

A  household survey by the City of Whittlesea last year shows increasing pressure on families in so-called growth corridors, who are struggling to pay utility bills and put food on the table.

“A total of 8.9 per cent of respondent households reported that they had run out of food and had not been able to buy more at least once in the last 12 months,” the survey said.

The City of Whittlesea covers almost 500 square kilometres in Melbourne’s north and will see its population grow from 186,000 to 300,000 by 2030.

Its issues mirror those in growth areas on city fringes around Australia, where roads, public transport, health and education services are not keeping up with population growteconomy property market grow wealth house dream first homeh.

The council’s Mary Agostino said the survey also showed that about 14 per cent of families in traditionally middle-class areas of the municipality were struggling to afford food.

“Policy and governments have not caught up that something’s not right there,” Ms Agostino said.   

“You’ve got these really high income-earning families, yet mortgage pressures and all that goes with living there is putting pressure on food security, children’s outcomes and a whole range of other social issues, so it’s something quite different to what we’ve experienced in the past.”

Melbourne-based support agency Kildonan Uniting Care told the ABC demand for financial help had increased more than 100 per cent in the last year.

There had also been a 40 per cent jump in demand for family support services.

Mortgages, rent, transport and medical costs, rates and rising utility bills were all contributing to the crisis.

And this is when interest rates are low! interest rate

Unfortunately the income that people living in these areas are receiving is just not keeping up with their cost of living.

Imagine what will happen when interest rates rise, as they eventually will.

For mine I’ll stick to the more “established money” suburbs of our big capital cities to invest my money. And so should you.

And if you can’t afford a house there, you’ll find apartments make great investments.

Read more: Pete Wargent also wrote a great blog explaining another reason why capital city properties are outperforming.

from Property UpdateProperty Update

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