Hit and miss hotspots: Box Hill flames out while Highgate, Karratha, Newman and other WA mining locations are on fire

Investors who purchased a house in the east Melbourne suburb of Box Hill based on its inclusion in last year’s Hot 100 list published by Australian Property Investor (API) magazine are unlikely to be a happy bunch.

As API published its flagship 2013 Hot 100 list this month, Property Observer analysed the performance of all 100 suburbs that made it on to last year’s list.

We found that Box Hill was the poorest performing detached housing market on last year’s list, which included suburbs that were expected to show growth over the following 12 months and beyond.

But rather than rise as expected, Box Hill's median house price has fallen 19% between publication of the 2012 and 2013 Hot 100 reports. And it fails to make a re-appearance on the latest list of hotspots.

Of the 90 hot spot suburbs from 2012 where comparison were possible, 25 locations recorded declined of 1% or more over the year, 19 locations treaded water, 34 recorded gains of between 1% and 10% in their median house prices and 12 managed gains of more than 10%.

According to Australian Property Monitors (APM) data published by API Magazine, Box Hill recorded a median house price of $545,000 based on sales of 111 houses over the 12 months to January 2013.

This compares with a median price of $748,000 recorded from 101 sales for the 12 months to December 2011.

Box Hill was picked last year because of its good local council,  good location – just 13 kilometres east of the Melbourne CBD – and because of its status as one of Melbourne’s biggest transport interchanges “expected to accommodate a significant increase in housing around the core retail district”.

The suburb is the site of the $447 million Box Hill hospital redevelopment while the Cromwell Property Group recently raised $66 million from investors for a new 20-storey ATO building.

While investing in property is clearly a long-term play – a point highlighted by API Magazine - and Box Hill prices may yet rise as these major projects are completed, investors who bought in the suburb will be dismayed to learn that Box Hill is not among the 29 suburbs that have scored consecutive mentions in both 2012 and 2013 Hot 100 lists prepared by API Magazine.

Three other Melbourne suburbs, picked as hotspots last year by API, recorded near 10% annual declines in median values, with Broadmeadows house prices falling 10%, Sunshine prices down 9.4% and Northcote prices down 8.1%.

At the other end of the spectrum, the inner Perth suburb of Highgate, just 1.7 kilometres from the CBD, has been a hotspot standout, with house median prices up 43% over the same period.

For the 12 months to January 31 2013, APM records a Highgate median house price of $609,000 from 40 sales compared with a median house price of $497,000 for the 12 months to December 2011.

Highgate was included on the Hot 100 list based on good local council involvement in creating “mixed-use hubs” in surrounding areas, great accessibility to the city centre via road and train and good amenities and services in neighbouring suburbs like Mount Lawley and East Perth.

In addition, and as indicated by the small number of sales recorded, Highgate is a tightly-held suburb with “aesthetic appeal”

Surprisingly and despite the strong showing, Highgate is not listed as a hot spot in this year’s list, though a number of other eastern Perth suburbs are, including Dianella (6 kilometres north east of Perth), Carlisle ( 6 kilometres south east of Perth), Bayswater (6.6 kilometres north east of Perth) and Belmont (6.5 kilometres east of Perth.)

WA locations dominated the best performing locations from the 2012 list with Highgate followed by the Pilbara mining hotspots of Karratha (up 36.4%), Newman (up 25.5%) and Onslow (22.6%).

Just 29 suburbs have made it onto the hotlist for the second year in a row demonstrating the fleeting nature of so-called “hotspots”

The report highlights the challenges in picking property investment hotspots and the importance of doing your own research.

Indeed, API Magazine, in its guide to this year’s list says readers should not buy a property in a location “just because it’s in the Hot 100”.

However, it does say that suburbs have been picked for their “growth prospects over the next 12 months as well as the longer term”.

“This list isn’t your due diligence. You must do your own detailed homework into any area you’re going to invest in, as well as the property type,” says API.