Why price per square metre is crucial data for property investors

Why price per square metre is crucial data for property investors
In our analysis, price per square metre (PSM) data is one of the key criteria we look for when reviewing property trends.
 
Why? Because, put simply, PSM reveals the ‘true’ value of the property. As a result, it is a very effective tool to identify opportunities and anomalies in the market, helping investors to better assess the risks associated with suburbs and individual properties (particularly units).  
 
Through our extensive research, we’ve been able to identify prime opportunities by leveraging PSM data as follows.  
 
First, we identify areas (e.g. Eastern Suburbs, North Shore) with a high price per square metre. Based on our research, these areas carry a lower level of risk and deliver, overall, a stronger capital growth over the long-term, particularly for houses.
 

Price growth over 5 years

 
Our next step is to identify suburbs within these established areas, where the price per square metre is low compared to the surrounding suburbs. This reduces your equity risk and increases the likelihood for a solid capital growth.
 
Note that this data is very different from median price data, as unit sizes (and therefore values) can vary greatly within the same area. 
 
Investors who successfully identified such opportunities five years ago, today own property that have significantly outperformed the market. A prime example is a unit in Freshwater; with a price PSM of $7,516, it was significantly cheaper than the nearby Curl-Curl, with a price PSM of $10,000. As a result, property prices in Freshwater have increased by 63.5% in comparison to 47.5% in Curl-Curl. 
 
Another good example is a unit in Vaucluse – and investment that is often overlooked by eastern suburbs buyers, who favour the beachside areas of North Bondi and Bondi Beach. Five years ago, the price per square metre in Vaucluse was $6,596, significantly cheaper than in these trendy suburbs. The price of a relatively large three bedrooms in Vaucluse was similar to the price of a large two-bedroom unit in neighboring suburbs. 
 
Moving forward half a decade, the capital growth in Vaucluse was 78.2% and a large three bedrooms there is rare as a hen’s teeth. In comparison, in the surrounding areas growth across the same period was around 60%. 
 
Currently, there are a large number of anomalies in the market. A prime example is units in Glebe and Annandale, where the median unit prices are similar with $808,000 and $875,000, respectively, representing a price difference of 7.5%.  
 
However, the price per square meter in Glebe is only $9,280 where the price in Annandale is $12,873 – effectively a 38% price difference.  
 
Another good example is Rose Bay. With a median unit price of $1,065,000, many investors consider that suburb to be on par with Dover Heights and North Bondi, which boast a similar median price. However, the price PSM in Rose Bay is only $11,100, while in Dover Heights and North Bondi it exceeds $13,000 PSM – effectively a 17% price difference. 
 
On the other side of the scale, we have identified Zetland as one of the riskiest suburbs in our 100 Danger Zones Report. Zetland has a very large number of units in the pipeline, and moreover, the price PSM is $11,658 – very expensive, especially when you consider it is around 10% more expensive than the affluent suburb of Double Bay. With this kind of analysis, it becomes clear that PSM data can be an invaluable tool for selecting your next quality property.
 
RiskWise Property Research has performed a special analysis for Smart Property Investment to identify the most affordable and most expensive suburbs when considering price per square metre.  Unsurprisingly, for both houses and units the top 10 suburbs with a high price per square metre are in Sydney.
 
Units - All top 10 high price per square metre are in NSW:
 
 
State Postcode Suburb Median AVM Price per SQM
NSW 2000 BARANGAROO $2,901,772  21,264
NSW 2000 DAWES POINT $3,524,007  21,417
NSW 2000 MILLERS POINT $1,692,669  15,370
NSW 2026 BONDI BEACH $1,064,880  14,772
NSW 2026 TAMARAMA $1,438,778  17,224
NSW 2027 DARLING POINT $2,136,315  16,044
NSW 2027 POINT PIPER $2,792,995  16,843
NSW 2041 BALMAIN EAST $1,501,841  16,045
NSW 2085 BELROSE $1,005,484  29,573
NSW 2230 BURRANEER $1,214,742  17,416
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other areas with a high price per square metre for units:
 
State Postcode Suburb Median AVM Price per SQM
VIC 3002 EAST MELBOURNE $636,524  8,528
VIC 3065 FITZROY $771,095  9,481
VIC 3206 ALBERT PARK $668,510  8,739
VIC 3206 MIDDLE PARK $771,375  9,523
QLD 4000 BRISBANE CITY $485,144  5,397
QLD 4102 DUTTON PARK $497,876  7,365
QLD 4105 TENNYSON $1,107,828  5,961
WA 6010 SWANBOURNE $842,311  9,285
WA 6011 COTTESLOE $773,591  9,133
WA 6014 FLOREAT $847,281  8,065
 
 
 
Houses - All top 10 high price per square metre are in NSW
 
State Postcode Suburb Median AVM Price per SQM
NSW 2008 CHIPPENDALE $1,509,531  12,793
NSW 2008 DARLINGTON $1,518,696  13,504
NSW 2009 PYRMONT $1,284,842  13,321
NSW 2010 DARLINGHURST $1,962,951  16,408
NSW 2010 SURRY HILLS $1,726,803  15,328
NSW 2011 WOOLLOOMOOLOO $1,387,798  12,213
NSW 2021 PADDINGTON $2,291,087  16,930
NSW 2026 TAMARAMA $4,031,327  13,507
NSW 2060 MCMAHONS POINT $3,204,002  15,327
NSW 2110 WOOLWICH $5,970,325  12,237
 
 
 
Other areas with a high price per square metre for houses:
 
State Postcode Suburb Median AVM Price per SQM
VIC 3121 BURNLEY $1,539,012  7,080
VIC 3182 ST KILDA WEST $2,101,602  6,597
VIC 3206 ALBERT PARK $2,044,262  10,116
VIC 3206 MIDDLE PARK $2,545,182  11,185
QLD 4000 PETRIE TERRACE $831,390  3,093
QLD 4000 SPRING HILL $943,009  3,002
QLD 4005 TENERIFFE $1,590,590  3,342
WA 6005 WEST PERTH $699,780  3,678
WA 6008 SUBIACO $1,200,114  3,472
WA 6011 COTTESLOE $1,829,331
 3,433
 
 

Houses within 20km from the CBD with a low price per square metre:
 
State Postcode Suburb Median AVM Price per SQM
NSW 2142 ROSEHILL $807,938  1,340
NSW 2142 SOUTH GRANVILLE $889,440  1,304
NSW 2143 BIRRONG $837,858  1,413
NSW 2161 GUILDFORD $846,997  1,413
NSW 2163 VILLAWOOD $770,367  1,275
NSW 2231 KURNELL $1,043,887  1,385
VIC 3047 BROADMEADOWS $431,002  702
VIC 3047 DALLAS $354,453  600
VIC 3048 COOLAROO $353,113  626
VIC 3048 MEADOW HEIGHTS $403,976  717
VIC 3061 CAMPBELLFIELD $411,481  701
QLD 4108 ARCHERFIELD $362,218  88
QLD 4070 MOGGILL $536,667  448
QLD 4110 ACACIA RIDGE $389,316  521
QLD 4114 WOODRIDGE $301,340  456
QLD 4300 GAILES $261,650  393
WA 6056 BOYA $588,530  209
WA 6056 GREENMOUNT $478,725  320
WA 6076 GOOSEBERRY HILL $676,451  330
WA 6076 LESMURDIE $604,403  372
WA 6110 MARTIN $472,646  195
 
 
 
RiskWise Property Research's custom made reports and the Best and Worst Off-The-Plan Areas reports are available at otp.riskwiseproperty.com.au.
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