Investors’ guide: How to purchase property in a buyer’s market
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Over the last two years, the Australian property market, as a whole, has been an investor’s dream – but not all suburbs are created equal.
The current climate of rising interest rates and soaring financial pressures has begun to turn the tide away from the investors, with a new report from Suburb Help outlining the worst suburbs for investors nationwide.
The report outlines the 20 unit markets in Australia that investors should avoid, with each listed suburb defined as “soft”. A definitively “soft” property market, according to the report, is a suburb where the average time a property spends on market is in excess of 40 days, and where inventory levels are greater than six months.
Suburbs were also excluded from the rankings if they had fewer than 20 properties listed for sale.
Of the worst suburbs to invest in units across Australia, the top 20 are located across four states and territories.
NSW boasts the most markets for investors to avoid, with 11, followed by Western Australia with six, with the ranking rounded out by Victoria (2) and the Northern Territory (1).
Suburb Help chief property strategist Veronica Morgan believes that in the current environment of rising interest rates, property investors should be extra cautious about identifying the best investment.
“The reason property investors should avoid the suburbs in this report is not necessarily because they’re bad locations but because they’re bad locations as of May 2022,” she said.
Ms Morgan also stated that the included suburbs range from areas and markets that have been poor investment opportunities in the past right through to suburbs that have previously been strong for investors and might be an option further down the line.
She also added that “inventory levels have been rising in all these locations; and, in some instances, are extremely high”.
“At the same time, days on market are on the high side, and often rising as well. When you put those data points together, it suggests that prices in these locations will either grow slowly in the medium-term, or go backwards. By contrast, there are other locations in Australia that will deliver superior price growth,” she said.
The top five unit markets to avoid investing in are:
The average unit sale price in the Western Sydney suburb of Parramatta for May 2022 was $590,000, with the annual price growth averaging 5.4 per cent over the past decade. Inventory levels in the mini-city currently sit at 10.7 months, up two months from a year ago, with a unit in the area spending 44 days on the market on average.
2. Sydney, Sydney inner city (NSW):
Units in the inner city of Sydney sold for an average price of $1.2 million in May 2022, despite inventory levels exceeding 12 months. Additionally, units in this suburb spend, on average, 45 days on the market and have achieved an average annual price growth of 5.7 per cent over the last 10 years.
3. East Perth, City (WA):
Units in East Perth have experienced a measly average annual price growth of 0.7 per cent over the past 10 years, with the median sales price for May 2022 sitting at $460,000. Inventory levels have risen by 3.2 months in the past 12 months, up to 9.9 months for May, while the average unit in the area spends 80 days on the market.
4. Perth, Perth City (WA):
Nearby Perth has also experienced an average annual growth of 0.7 per cent in the last decade, with the median unit sales price in the West Australian capital currently $430,000. Inventory levels have jumped by 3.9 months to 11.5 months, and the average property will spend just over two months (62 days) on the market.
5. Rouse Hill, Rouse Hill-McGraths Hill (NSW):
Located in Sydney’s north-west, units in Rouse Hill will fetch a seller $755,000 on average, with these properties experiencing 7.8 per cent average price growth over the last 10 years. The suburb currently has inventory levels that exceed 12 months, with each unit spending 56 days on the market, on average.