The one mistake Aussies are making when buying a house – and the things you should be looking for

Potential property buyers are told not to buy something just because it's cheap, while one wealth expert warns it could cost you money in the long run.

Metropole director and property investment expert Brett Warren sounded the alarm, revealing that the cheapest purchase was not necessarily the best one to make.

He explained that an important factor to consider when purchasing a home is the location of the property, with some areas experiencing higher growth than others.

House prices in Australia have risen 8.3 percent since January, data from CoreLogic shows.

House prices in the capital rose by an even more dramatic 9.9 percent, while foreign immigration reached record levels.

But regional house prices rose by a more moderate 3.9 percent in 2023.

Homes in more remote parts of Australia that do not receive the same rate of overseas or interstate migration are therefore more affordable.

Mr Warren said home buyers in low-cost areas were likely to miss out on capital growth.

“The cheapest property in Australia today will almost always be cheap in the future,” he said.

“Remember, location does about 80 percent of the heavy lifting of growing your property prices.

'This means that when you look at 'cheap' properties in 'cheap' locations, they are almost always unlikely to achieve anywhere near the capital growth of good investment-grade properties in prime locations.

“While it may be worth noting where cheap real estate in Australia is located as part of your preliminary research, it should end there… at the research stage.”

Australia's cheapest houses

Isolated towns in parts of Western Australia's Goldfields-Esperance region are home to some of Australia's cheapest homes.

Kamalda East's average house price of $120,241, in a town of just 800 people, is significantly cheaper than Australia's average house price of $811,707.

But last year, prices rose just 4 percent – ​​well below the national annual pace of 7.4 percent.

In nearby Coolgardie, with a population of 774, house prices also rose just 4 per cent to $159,666.

Apartments to avoid

The cheap suburbs rule could also be applied to units in parts of western Sydney, with values ​​in some suburbs falling despite a record 518,100 net migrants flooding into Australia in the last financial year.

The average price of an apartment in Guildford fell by one per cent last year to $469,146.

This came as the average price of apartments in Sydney rose 7.1 per cent to $836,220.

The value of apartments in Rosehill has risen by just three per cent in the past year to $494,101.

This is also where New South Wales Premier Chris Minns has announced plans to turn the Rosehill Gardens Racecourse into a new 'mini-city' with 25,000 new homes, mainly apartments next to a new metro station.

A greater range of units also means buyers have more choice to choose from.

That area also falls within the Parramatta council area, which was responsible for a fifth of Sydney's loss-making unit sales in CoreLogic's Pain and Gain report for the September quarter.

Those who made a loss in this local government area typically sold after less than seven years, making an average loss of $45,550.

House to buy

Mr Warren said smart investors are focusing on long-term capital growth rather than rental yields, with tenants' annual income being higher as a percentage of the property's value.

“Building wealth through real estate is best accomplished by purchasing high-quality, investment-grade properties and holding them for the long term, allowing the market to do most of the hard work for you,” he said.

'I've met so many investors who are fixated on cheap real estate or rental yields, but for me, capital growth is always the most important thing to look for when buying an investment property.'

That would most likely involve buying a house in a capital city where prices are likely to rise.

The average house price in Brisbane has risen 10.6 per cent to $870,526 in the past year, and 12.1 per cent since January, even as the Reserve Bank of Australia raised interest rates in November for the 13th time in 18 months.

Even with RBA rates at a 12-year high of 4.35 per cent, more affordable suburbs have seen double-digit growth in the past year, with prices in Redcliffe, just north of Brisbane, up 14 per cent increased.

At $766,406, this Moreton Bay postcode isn't ultra cheap, but a three-bedroom house in the area sold for $665,000 in November, while a four-bedroom house with a backyard sold for $680,000 a month earlier.