The Next Gentrification Hotspot

For brokers, knowing the next property hotspot is a superpower.

It gives you the foresight to guide your clients into making savvy financial decisions and magnifies the areas you should be targeting.

But especially after covid, even the best property pundits struggle to reliably predict the next boom suburbs.

That’s all about to change with a recent model from UNSW researchers. Their data yields some interesting results and it begs the question, which suburbs will be sacrificed next to the gods of gentrification and see their values surge?

First, let’s talk about gentrification.

You’ve probably come across the term by now, or seen its effects.

Gentrification is the urban renewal of lower and middle class neighbourhoods. It typically involves the injection of cooler, younger people and an explosion of boutique small businesses. Grungy or ‘rough’ areas are revitalised with cool cafes, vintage clothes stores, and a swathe of new developments. It is much more than just a lick of new paint. Gentrification displaces poorer people and increases the socioeconomic status of a suburb, creating totally new communities. Importantly, it causes a surge in the value of property in the area and lifts the quality of life with new infrastructure and amenities.

Walk through Newtown’s King Street or through Melbourne’s Fitzroy and you’ll understand. They are full of dynamic businesses, surrounded by great schools, and are public transport hubs.

SYDNEY, AUSTRALIA, SMH, JUNE 11: Generic photos in Newtown on King Street on JUNE 11, 2018 in Sydney, Australia. (Photo by Christopher Pearce/Fairfax Media)

These are crucial points for a broker, who has to understand their client’s affordability, the lender’s risk appetite and any future plans for the property the client may have. So knowing which areas make good investments could be crucial insight for a borrower. It also gives brokers an idea of which areas to target with their marketing.

How does the UNSW model work?

The model tracks changes in socio-economic status, business activity, housing data, and even AirBNB activity to make predictions on suburban gentrification. rIt used 80 sources of data ranging from the census to the business registry and processed the results with machine learning.

It made some pretty interesting conclusions.

Botany is in store for the biggest rise in prices.

According to the UNSW model, Botany is in for a high increase in socioeconomic status.

While Botany is well outside the pantheon of emerging suburbs, like Summer Hill and Alexandria, it is set to boom. And it is easy to understand why.

Botany is on the fringe of Sydney’s prestigious Eastern Suburbs, located near prime beaches, and is only a short commute to the city. Houses are much more affordable than in neighbouring suburbs and it has a thriving cafe culture. Some developers are calling it the next Redfern, with developments such as the $260 million Pemberton on the Park and Toplace’s 1000-dwelling Park Grove Precinct set to transform the area.

These new developments are anchored by parks and new retail spaces, making it more liveable.

All of these factors have resulted in median house prices leaping from $1.5M in January of 2021 to $1.83M this quarter. The suburb also offers incredibly strong yields of 3% for houses and 4.1% for apartments. Many Botany real estate agents have noticed families migrating in from across the Eastern Suburbs and upscaling the old fibro houses of the area.

As the industrial real estate continues to move out of Botany and further away from the city, more developers will turn factories and warehouses into residential properties and more affluent families will come to the area.

Brokers should focus on Botany as an up-and-coming property hotspot.

The St George area is one to watch for brokers.

Suburbs like Hurstville, Kogarah, and Rockdale are being touted as the next gentrification hotspots.

Buyers priced out of the city are snapping up property in these well-located, family-friendly, and commutable areas. Brokers should take advantage of this spillover effect when it comes to outreach and marketing. Furthermore, the outlook for these areas remains positive. Many real estate agents think these areas will hold up well in the current downturn and bounce back quicker than neighbouring areas.

It is easy to see the appeal. While they started as thoroughly working class areas, they have modern and fresh new developments and better transport links. Walk down Hurstville’s high street and you can breathe in the newness. A renovated central plaza, gleaming glass apartment blocks, and a bustling Westfields has turned a once sleepy area into a commercial haven. It is replete with small businesses and home to some of the best hanging duck in Sydney. And it isn’t hard to imagine a few Merivale restaurants popping up in the near future – the ultimate sign of gentrification.

It is a similar story for Kogarah and Rockdale, which have seen huge apartment developments built over the last few years and a rapid modernisation of its old fibro-lined streets.

This all comes together to drive an influx of younger residents, from professional couples to younger families. It is just the fresh energy that a growing suburb needs.

It is also just a 20 minute train trip from the city.

If brokers ride the wave of St George’s next gentrification surge they stand to reap the benefits.

The Sutherland Shire is primed for an explosion of values.

Another historically working class area, thousands of Aussies are looking to flock to the Shire in search of a sea-change. Anchored by the iconic Cronulla beach and with tree lined streets, the Shire delivers a greener and quieter lifestyle without foregoing the comforts of the city.

Suburbs including Kirrawee, Sutherland, and Miranda are all expected to increase in gentrification. This will bring in an influx of millennials, young professionals, and families looking to settle down in the area and secure their dream property.

Sutherland and Kirrawee in particular have had a changing of the guard over the last few years. Older residents have moved on and younger people have moved in. Sutherland is more affluent and more dynamic than it was 10 years ago. That trend is not about to change.

Furthermore, Sutho as the locals know it, is only a 30 minute train trip to the city and 15 minute trip to Cronulla. It is the perfect balance between suburban and city. The median house price in Sutherland has surged from $1.1M in January 2021 to $1.33M, and it is expected to return to strong growth once interest rates loosen.

Kirrawee is an equally strong drawcard for buyers looking to enter the Shire.

The recently completed South Village development added nearly 1,000 new dwellings to the area along with a revitalised dining and retail pr ecinct. It boasts an upmarket Panetta Mercato grocer and some bustling boutique businesses.

Oh and did I mention that it has 2 craft breweries?

That’s right, craft beer is no longer the exclusive domain of Marrickville and the Inner-West. It is a sure sign of gentrification and explains why Kirrawee is a magnet for new home buyers. In Kirrawee you can afford to live well without breaking the bank, and that is drawing in hundreds of new buyers. The area is expected to reach nearly 6,000 dwellings by 2036. And someone has to buy them…

From Ramen bars in Sutherland to craft breweries in Kirrawee, the Shire has a lot to offer young people and they will be looking to snap up property fast.

Brokers should look to gentrification when mapping out their marketing and targeting.

The gentrification wave is set to envelop suburbs much farther from the city centre than ever before. It is leaving affluent couples and families priced out of inner-city suburbs hungry for property in boom areas and willing to pay for it.

Brokers should take these trends in stride.

Knowing which areas are the next purchase hotspots gives you a far better idea of where to target and how to spend those sweet-sweet marketing dollars. If you don’t use the information wisely, at least use it to find a great craft beer.

About the author

Ulrika Lobo

Ulrika Lobo is the lending specialist at Sparrow Loans and has over ten years of experience in the commercial business loan space. Ulrika co-founded Sparrow Loans to provide Australian SMEs with a faster and easier way to access finance. Ulrika is responsible for managing the lending process from underwriting to execution and settlement and post-settlement support.