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Revealed: the suburbs property investors should avoid

New report shows the riskiest locations across the country.

When it comes to buying a property there are plenty of people happy to tell you about the benefits of a suburb, but few who talk about which ones to avoid.

According to property analyst Anna Porter, principal of Suburbanite, investors are at risk from the heavy-handed sales tactics of property spruikers.

Porter told Your Money Live that there is an “underbelly” in the market of poor areas being packaged up “as the next best thing.”

“People have this belief that the market will always go up in value. Unfortunately, that creates a really false sense of security among investors,” Porter explained.

She says a bad investment on a property can lead to financial ruin.

“I remember one year a woman rang me and it broke my heart. She said two of her investments had done so badly that – she thought she was going to retire – but she actually couldn’t afford to buy makeup anymore.”

To avoid getting caught in a bad deal, it’s important to stay on top of the price movements in suburbs.

According to a new report by Suburbanite, last year Australia saw a 37 per cent increase in the number of suburbs where values fell.

While Porter says that negative growth doesn’t always mean its a bad market, she says investors should take it as a cue to ask more questions before buying.

“Bad investment locations can be from a couple of things. It can be just the market shifting and changing the gear and it’s a timing in the cycle thing. Or it can be a market that has fundamental problems…and it’s not going to improve any time soon,” Porter explained.

Melbourne and Sydney saw the biggest downward shifts in 2018, with NSW adding the majority of new suburbs (237) followed by an additional 118 for Victoria.

These were some of the notable suburbs and towns that Porter said investors should consider avoiding:

NSW

The massive supply of new apartments in the last couple of years in NSW has seen dozens of unit markets drop in value.

In the coastal city of Wollongong, apartment prices fell by a staggering 43.9 per cent in 2018 thanks to an “oversupply issue.”

Some inner city zones in Sydney also took a hit, with unit values in the suburb of Ultimo falling by 25.3 per cent last year.

“It is a timing in the market [issue]. But you couple that with the fact that there’s a real… oversupply of units, and that’s the sort of outcome you get. It’s going to take a couple of years of pain to push through,” Porter said.

Among the worst NSW housing markets last year was Church Point in Sydney’s Northern Beaches – which saw values fall by 25.3 per cent.

Victoria

Porter said the standout area for Victoria was the trendy beachside suburb of Melbourne’s St Kilda, which saw house values drop by 28.7 per cent in 2018.

“We saw, around even Melbourne CBD, units seeing some retraction. But St Kilda’s a really nice prestige family area. People say to me all the time if it’s in a good area it won’t go backwards, well that’s just not true. This is a timing thing, it’s a cyclical thing.”

She said markets similar to St Kilda are unlikely to see property values rise for another six or seven years, however, it does present a good opportunity for homeowners to get into the market.

Among the biggest movers on Victoria’s list was the Aberfeldie apartment market – which saw values plummet by a massive 35.8 per cent.

Queensland

Sunset in the mining region of Mount Isa saw house prices fall by 27.9 per cent, as businesses in the area continue to wind down.

In the unit market, Beachmere near Deception Bay saw unit values drop by 49.8 per cent.

“There’s a lot of investment firms pushing Deception Bay as a good investment area,” Porter added. “That’s exactly the story I was telling before of developers getting creative.”

South Australia

Porter says while Adelaide is growing, property buyers still need to be cautious about investing in mining or industrial regions in South Australia.

“The actual metro market in Adelaide is increasing, yet in Mount Gambier, which is an outlying industrial or regional hub, these areas are retracting.”

“It’s about getting into the right type of market, even if you’re in a state that’s seeing growth.”

Among the worst performers were the Port Macdonnell housing market (-22.8 per cent) and the apartment market in Allenby Gardens (-28.7 per cent).

Western Australia

With the mining boom coming to an end, towns in Western Australia have received plenty of negative attention as businesses wind down operations.

“It might be great when there’s a mining boom, but if you go regional, you have to think what happens when the market turns that corner?”

The mining regional city of Kalgoorlie has been among the hardest hit in recent years, with the nearby town of Kambalda seeing house price falls of up to 35 per cent.

In the apartment market, the beachside town of Busselton saw values fall by up to 31.6 per cent in some suburbs.

However, Porter says Perth was a positive story out of last year, with few new suburbs added to the list, indicating a positive direction for the capital city.

Tasmania

Tasmania has outperformed other states in the last couple of years in terms of property growth, however Porter warns that there are plenty of risky zones.

“It’s not all puppy dogs and roses. If you’re investing there you have to be very cautious,” she warns.

Among the standouts was the inner city suburb of East Launceston, which saw apartment values fall by more than 14 per cent.  Meanwhile, Shorewell Park saw house values dive by almost 27 per cent.

“This is a tale of two stories, we’re hearing [about] the great growth coming out of parts of Tasmania, but this is obviously the other side of the story.”

ACT

Along with Tasmania, ACT has been less negatively impacted by falling house prices compared to other states, with few new suburbs added to the list for Canberra.

However, Porter notes that apartment values have seen the biggest drops in the ACT market.

The suburb of Phillip saw apartment property values fall by more than 26 per cent, while unit values in inner city areas of Canberra have seen a similar downward slide.

“Units are a product that don’t perform very well in Canberra, they’re not suited to the demographic, and there’s an oversupply.”

Meanwhile, the neighbouring suburb of Mawson also saw house prices fall by 8.7 per cent on average.

Watch the video above for more.

Read more: Top five suburbs for property investors in 2019
More: 10 growth suburbs defying the property slump
More: Metro vs regional property: where should you invest?

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