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Top 10 danger zones in Sydney and Melbourne: Important data for investors

By Noemi Pamintuan-jara 07 October 2021 | 1 minute read

Investors have been warned against buying units in a number of Sydney and Melbourne suburbs, despite the property frenzy that’s driving purchasers towards new developments.

Sydney and Melbourne

Peter Wargent, the co-founder of BuyersBuyers, is warning investors to proceed with caution across a number of Sydney and Melbourne suburbs, where new developments are rife. 

Mr Wargent explained that “although demand has dropped sharply given the absence of international students and other visitors, there are still some areas with a high volume of potential new units in the pipeline over the next couple of years.”

Considering the strict border restrictions due to the pandemic, it’s uncertain how international migration will be affected over the next couple of months, or even years.

“There are many uncertainties about the return of international migration at present, and therefore the risks of buying a new unit are even higher than they normally are right now,” Mr Wargent added.

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Doron Peleg, founder of RiskWise Property Research, shares the same insight and has warned landlords to be wary of unit supply: “We have compiled our top 10 danger zone suburbs in Sydney and Melbourne where investors should be wary about the risk of rental vacancies and capital loss, particularly investors considering new or off-the-plan purchases.”

Based on research done by CoreLogic and RiskWise Property, these are the top 10 danger zones in Sydney and Melbourne:


Top danger zone suburbs in Sydney

 

Suburb

Postcode

New Units 

in the Pipeline 

(24 months)

As % of 

Existing Stock

Schofields

2762

3397

115.7%

Gosford

2250

1619

28.2%

Rouse Hill

2155

1274

88.2%

Zetland

2017

1110

6.3%

Liverpool

2170

893

10.6%

EppingEpping, VIC Epping, NSW

2121

806

11.9%

BurwoodBurwood, NSW Burwood, VIC

2134

552

9.2%

 

Top danger zone suburbs in Melbourne

 

Suburb

Postcode

New Units 

in the Pipeline 

(24 months)

As % of 

Existing Stock

Box Hill

3128

1833

25.5%

Footscray

3011

1531

27.5%

South Melbourne

3205

1056

21.1%

Coburg

3058

970

26.9%

Preston

3072

940

21.6%

Docklands

3008

933

8.3%

BrunswickBrunswick, WA Brunswick, VIC

3056

882

12.2%

Burnley

3121

770

7.2%

Blackburn

3130

629

19.1%

Collingwood

3066

541

14.8%

Mr Peleg expounded that the CBD areas of the capital cities have been a risk area for some time, but in Sydney, the risks are spread quite broadly across the city, from Liverpool to the inner-south and Zetland, and up to parts of the Central Coast, such as Gosford”.

The situation is the same in Melbourne. “The higher risk areas have been more concentrated in the inner suburbs, and we have warned about a number of these locations for a couple of years now,” said Mr Peleg.

The same has also been said about Brisbane’s inner city, which RiskWise research group has previously warned as a danger zone”.

What, then, can be done to avoid or manage these risks?

Established units can still be a solid investment in supply-constrained areas, especially in the largest capital cities, but its generally the rising land values that deliver the returns in Australian real estate, so units in boutique blocks with a high land-to-asset ratio and a point of scarcity value tend to fare best,” suggested Mr Wargent.

He highlighted that investors seem to understand these risks because they have been seen to pivot their investments towards houses over the past 18 months.

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Top 10 danger zones in Sydney and Melbourne: Important data for investors
Sydney and Melbourne
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