Are 'blue-chip' suburbs always winners?

When it comes to long-term investments, Place Advisory believe that blue-chip locations are always the winners for property investors.

Noting that while high returns in high risk locations put up a fight over the short term, Place Advisory director Lachlan Walker says that blue-chip will still prevail.

“Although a blue-chip location will be more expensive to buy into initially, the end results are well worth it,” said Walker.

“A blue-chip area is one that has consistently strong rental yields and steady long-term capital growth – it’s a reliable region that constantly delivers, but takes a ‘slow and steady wins the race’ approach.”

The belief is that these regions can tough it out through downturns and adverse economic conditions and provide stable growth.

The identifiers of blue-chip locations

Blue-chip locations can be identified by ‘stereotypical’ price drivers, such as:

  • Abundant public transport

  • Parks

  • Water

  • Flourishing cultural, restaurant and entertainment scene

  • Usually 10 kilometre radius from capital city’s CBD

Risky locations can also be worthwhile considerations, particularly with the potential for a massive rental market, he said.

“These locations often come onto an investor’s radar due to a particular occurrence – for example, increased job opportunities. But they have earned their ‘risky’ label for a reason – and the risk is that there are high peaks and troughs, and therefore the possibility that their growth could end as quickly as it has begun, sometimes with very little warning.”

Three fundamentals

The three fundamentals investors look for:

  • Population growth

  • Infrastructure and government investment

  • Employment opportunities and diversity

Pointing to the above fundamentals, Walker said that blue-chip suburbs typically characterize all three, while other areas don’t necessarily provide all of the options.

{module Do you think that the best investment opportunities are in blue chip areas?}

jduke@propertyobserver.com.au

 


Jennifer Duke

Jennifer Duke

Jennifer Duke was a property writer at Property Observer

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