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The suburbs hit hardest by price drops

By Sasha Karen 30 May 2019 | 1 minute read

Property investors who have seen big drops in their property's value during this downward cycle should remember the long-term and cyclical nature of property investment - even for those hit by falls of up to 44 per cent. 

Aerial shot of property

Property commentator Anna Porter, principal of Suburbanite, said that in this softening market, property investors should take heed from other kinds of investments, like stocks.

“When the market is falling and investors are seeing declines in their equities portfolio, a neutral position is a good outcome because it means that investor doesn’t sustain a loss. The property market can be viewed in a similar vein when values are declining,” Ms Porter said.

“But most investors won’t settle for this outcome and want year-on-year growth.”

Hold steady and be realistic 

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Instead of trying to exit the market when faced with the prospect of either selling or holding onto properties, property investors should instead be considering the movements in the market realistically.

“Many investors are now facing losses in their property values. We see it in markets across Sydney, Melbourne, units in Brisbane, Cairns, regional hubs and Canberra units to name a few,” she said.

“While some investors are seeing significant losses, others are still expecting high gains. It is really a matter of investors starting to adjust their expectations to meet the market.”

As an example, Ms Porter used off-the-plan units in the Brisbane markets, which are seeing $50,000 to $100,000 value declines across the last one to two years, as opposed to metro housing markets, which have largely held steady, with the slightest possibility of a value increase, over the last three to four years.

“Many investors still have expectations of strong upswing in the value of their property in the same period. In this scenario, a neutral return – meaning no growth but also no loss – is a fairly good outcome all things considered,” Ms Porter said.

“Many Australians have become so accustomed to the property market going up so much in the past five years they forget that every market has its corrections and downturns. With an environment that has been peppered with banking royal commissions, elections, a tightening lending environment and more changes of prime minister than we change seasons, the property market is expected to take a tumble.

“If investors can maintain a neutral position, or even some modest growth, then they should see that as a good outcome for the past few years.”

The big declines

Analysis by Suburbanite shown in its Negative Growth Report saw an increase of 37 per cent of declining property markets across the country compared to this time last year.

By looking at markets that saw significant declines, Ms Porter highlighted that seeing very mild to no growth can be beneficial for a property.

“If we look at Wollongong for example, the units in Mangerton contracted by 43.9 per cent. Compare this to Dapto where the houses grew modestly at a rate of 5.2 per cent,” she said.

“These type of growth figures in the low 5’s are a more realistic expectation, and we can expect to see this for some time to come.”

Ms Porter also identified the Liverpool unit market, which saw declines of 7 per cent, which she said was due to an oversupply of units.

“Liverpool is predominantly unit accommodation but the facilities in the area cater to families. So, the accommodation style is not appropriate for the locale. With a lack of restaurants, bars and nightlife in the area but a housing style that is predominantly for young couples, singles and retirees, there is no surprise that it underperforms when the market starts to cool off,” she said.

“People buy here when they are priced out of more urban hubs that offer better lifestyle amenities, but when the buying power returns to the market, this area starts to get overlooked for more desirable locations. This is exactly what we are starting to see in the statistics,” says Ms Porter.

Looking more north to Queensland’s Sunset in Mount Isa, Ms Porter said house prices saw a decline of 27.9 per cent due to businesses closing up shop, something that an investor may not account for.

Units in BeachmereBeachmere, QLD Beachmere, QLD are another area that may be presented as a favourable investment option but in fact has seen unit values decline by nearly half at 49.8 per cent.

Regional mining towns in Western Australia are no strangers to value declines post-mining boom, and Kalgoorie is no exception.

“Regional mining towns are great when there’s a mining boom, but if you go regional, you have to think what happens when the market turns that corner,” Ms Porter said.

“The mining city of Kalgoorlie has been hit hard in recent years, and according to my report, the nearby town of Kambalda has seen house prices fall up to 35 per cent.”

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The suburbs hit hardest by price drops
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