Contrasting Brisbane Real Estate: Blue Chip Townhouse vs. Middle Ring House

There's a commonly used saying in real estate that location does 80% of the heavy lifting with regards to the the capital growth of a property.

How true is this phrase and with what metric can you use to compare?

If you compare a blue chip suburb with one that is located on the urban fringe, the median prices will be so different, the comparison becomes a useless exercise.

I've found the easiest way to compare one property to another is by price. This is because the decision becomes that of a real choice that a potential home owner or investor would be faced with at their time of purchase. This case study explores this decision for two properties purchased just a few months apart at the beginning of the current Brisbane property boom.

At the back end of 2020, a budget of $400,000 was sufficient to give you a multitude of purchase option across the city. This budget is the basis for our case study.

Property 1 - Ascot Townhouse

Accommodation: 2 bed, 2 bath, 1 car

Description: 90’s built lock and leave townhouse in a great street well located close to amenities.

Purchase Price: $400,000 January 2021

Property 2 - Slacks Creek House

Accommodation: 3 bed, 1 bath, 2 car

Description: High set 1970’s Queenslander on 1000sqm  

Purchase Price $365,000 October 2020

Whilst these two properties have little similar attributes, they pose a common dilemma for a first home buyer entering the market. What do I prefer, the well located low maintenance townhouse in an aspirational suburb and be the envy of all my friends, or the suburban house that I can easily grow into? Whilst personal preference plays a role here, today we explore which of the two makes for a better financial decision.

Below are some data points to consider when comparing the two suburbs.

Suburb Statistics

Ascot

Location: 5.4km NE of Brisbane

Population: 6,531

Average Age: 40-59

Owner Occupier Percentage: 56%

Weekly Family Income: $3,088

Length of Ownership: 9.1 Years

Slacks Creek

Location: 19.7km SE of Brisbane

Population: 10,408

Average Age: 20-39

Owner Occupier Percentage: 56%

Weekly Family Income: $1,975

Length of Ownership: 13.2 Years

Prices and Performance

Ascot

Median House Price: $2.43M Apr 24

Average Annual Growth (20 Yrs): 6.15%

Median Weekly Rent: $1,200

Gross rental yield: 2.57%

Median Unit Price: $684,400 Apr 24

Average Annual Growth (20 Yrs): 4.90%

Median Weekly Rent: $550

Gross rental yield: 4.18%

Slacks Creek

Median House Price: $667,500 Apr 24

Average Annual Growth (20 Yrs): 6.58%

Median Weekly Rent: $525

Gross rental yield: 4.09%

Median Unit Price: $381,000 Apr 24

Average Annual Growth (20 Yrs): 5.66%

Median Weekly Rent: $420

Gross rental yield: 5.73%

Now that we understand the historical performance and the demographic profiles for each suburb, we have to consider the pro's and cons for each individual property.

Ascot - Pro's and Cons

Low Maintenance property in a blue chip location.

Strong demographics, great walkability.

Improvements are limited to internal cosmetic upgrades.

Suits a hands off investor, professional couple. Great rental appeal.

Slacks Creek - Pro's and Cons

Large land component, Clear ability to add value in multiple ways.

House will require maintenance due to age and condition.

Suburb and surrounds are less favoured than others.

Large lot for tenants to maintain. Appeals to family tenants.

Given these properties are vastly different in their offering, there is a case for a homeowner or investor to buy either of them for their own personal needs, risk appetite and goals. The key is to understand before making your purchase decision, what you could be leaving on the table by going in one direction over the other.

So how do we determine which property has outperformed? Recent sales.

Neither of these properties have been sold since their most recent purchase, however both have had neighbours sell comparable properties at similar times which provide the opportunity for comparison.

Recent Sale: Ascot

Neighbouring townhouse same complex, condition comparable to 2020 purchase

Sale Price: $625,000, Growth since 2020: 16.04% per annum or 56.25% in total  

Recent Sale: Slacks Creek

Neighbouring house same street, condition comparable to 2020 purchase

Sale Price: $706,500, Growth since 2020: 24.63% per annum or 93.56% in total 

The verdict

The Slacks Creek house has proved to be the better investment. Whilst it doesn’t win on every metric, the growth in both the short and long term has been superior along with a greater ability to manufacture equity.

Both properties represent great investment decisions and have exhibited impressive growth in the short term due to the strong performance of the Brisbane property market as a whole.

This case study outlines the importance of understanding the trade offs and advantages of any purchase decision before proceeding with a purchase to ensure the property is likely to achieve your objectives.