In the property industry we often hear this familiar advice: you should only invest in blue chip suburbs. The popularization of this term has even become a non-negotiable criterion of choosing a property location for some people. So, the question remains, is it true that these areas are the only places to put our money’s worth in?
What is a Blue Chip suburb?
We owe this name to none other than the history of poker. In poker, the blue chip is referred to as the highest value chip on the table. Slowly other industries such as finance and security have begun to adopt this term as well to coin reputable stocks. In other words, classifying good investments as blue chip has since become a common terminology.
A property can be considered ‘blue chip’ from its location and position.
In the real estate industry, only properties that tick certain boxes can get the so-called honorary badge of a blue chip suburb. To put it simply, the property needs to be located within a highly sought-after area with strong and ongoing demand. A blue chip property can refer to both the location or position.
In Australia, the prime areas that fall into this category are typically found within proximity to the CBD and other amenities. Examples of these suburbs in Sydney are Mosman, Bronte, Manly, Melbourne would be South Yarra, Toorak, Albert Park and Prahran and Brisbane it would be places like New Farm, Teneriffe, Chandler and Ascot. Another way to determine whether a suburb is fitted to this classification is also its strategic position to public transport, shops, and parks.
Blue Chip bias?
It is with no doubt that blue chip suburbs are notable for their sustainable property value growth. They’re safe, steady, and at low risk because of their high desirability which for the most part makes these areas seem unbothered by the turbulent property market cycle. Essentially, these are locations where people want to live.
This brings us to the misconception that in order to successfully profit from investment properties, they would have to be situated in blue chip suburbs only. This marketing scheme has been brewing in the property market for decades, to the point that it has become common to hear that some people have been told to only invest in big capital cities.
The downside? This bias has successfully created a warped perception of the actual opportunities that are available for the majority of the population. Blue chip properties have a disproportionately higher appeal which pushes other properties aside, within any given price sector.
Perth offers affordable properties that have continued to rise in value.
What does this mean?
It is important to know that Australia is a big country that offers many towns and cities that have their own unique economic profile, diverse lifestyles, and more importantly affordable housing price points. More affordable areas have been in high demand over time which contributes to the increase in property value.
At My Property Circles, our goal is to help people get on the property ladder sooner than later. And more often than not, the blue chip bias has been a factor that’s holding people back to pursuing their dreams. As keen investors, we can’t stress enough the importance of overcoming emotions and considering all the options available.
We encourage our friends, family and Property Circle members to consider affordable suburbs where one can realistically obtain several properties in various locations rather than just one expensive house in a blue chip suburb. This method is smart, secure, and strategic. This also creates the prospect for group property investors to diversify their portfolios. Owning a percentage a property is better than nothing at all.