Property investor no-go warning: Avoid Brisbane CBD, the Valley, Docklands and Zetland: Rich Harvey
Australia’s largest body of professional buyer’s agents is warning homebuyers and investors to ‘think local’ when it comes to property predictions for 2016.
It has urged buyers to base their buying decisions on supply and demand rather than potential hotspots.
The Real Estate Buyers Agents Association of Australia (REBAA) president Rich Harvey listed some no go zones in capital cities across Australia.
He noted conflicting property predictions suggesting prices in various locations will rise or fall could confuse buyers into making the wrong investment decisions.
“The problem with any forecast is trying to sum up the direction of a diverse range of property markets into a single figure or hotpot,” said Harvey.
“Australia has over 15,000 suburbs and there are more than 700 suburbs in Sydney, more than 540 in Melbourne and around 450 in Brisbane.
“So to say that Sydney will rise by four per cent can give a misleading perception to a novice investor thinking that buying an over-priced off-the-plan apartment in Zetland will actually see price growth in their property.
“That poor investor may well see a five per cent decline in the value of their property due to the rapid increase in supply in that local market.”
Harvey recommends buyers and investors need to look at the individual drivers of supply and demand within a smaller zone and at a suburb level.
“While the overall predictions give you some comfort that property is a good asset class, it is far better to think long-term and become an expert in the local housing market and make informed decisions accordingly,” he said.
“In markets where values are escalating quickly, it’s a potential minefield for buyers who feel under pressure to buy.
“Buyers need to ensure they understand the local growth drivers of supply and demand and that they are in the right price pocket for that particular location. “A buyer’s agent can help analyse the data quickly using the best valuation tools available and guide buyers through the property maze with minimum stress.”
The REBAA recommends the following property investments to avoid in 2016:
Brisbane Brisbane Avoid: High density apartments in the CBD, West End and Fortitude Valley. Recommend: Character houses in low density, established areas with good schools, transport and lots of renovation activity.
Sydney
Avoid: High density off-plan apartments in Mascot, Zetland, and some pockets around Parramatta and Rhodes with potential for oversupply as record building approvals take shape. Sydney still fundamentally under-supplied, but a short-term spike in units coming to market will depress rents.
Recommend: Blue chips suburbs with strong growth potential: Eastern suburbs North Shore, inner west. Suburbs with lifestyle appeal, new transport infrastructure, growing population and continuing gentrification.
ACT
Avoid: High density apartments either existing or off the plan in most areas.
Recommend: Small boutique existing townhouse developments. Homes in established areas with access to good schools - inner north, inner south, Belconnen and Woden areas.
Avoid: High density apartment blocks. Much like the Sydney market, avoid areas like Docklands and possibly Fisherman’s Bend and other areas that are being oversupplied with new, high-rise apartment blocks.
Recommend: Low density developments that are well built with manageable ongoing running costs. Land is in short supply, so if you can afford to buy property in a good, well-serviced location with some land, then do that.
South Australia
Avoid: Off-the-plan apartments in the Adelaide CBD.
Recommend: Properties with development potential in middle-ring suburbs continue to increase in popularity. Also character properties with renovation potential in good suburbs on the “fringe” of upmarket established locations.
Tasmania
Avoid: Lifestyle properties away from major population centres for income investment. Great if you plan to live there but not the best choice for a good performing long-term investment.
Recommend: Character properties in the inner city Hobart suburbs such as North Hobart, New Town and West Hobart are in very high demand with buyers out stripping supply. This shortage of supply is impacting on higher prices. A wellpriced renovator in these areas could be extremely beneficial. Also buying on the fringes of these suburbs is worth considering.
Western Australia
Avoid: Developing suburbs on the outer northern and southern metropolitan fringes of Perth where there is currently an oversupply which is expected to continue for the next 12 to 18 months. Likewise the Perth unit market is looming for an oversupply for the next 12 months to two years.
Recommend: Houses in a 10-20km radius of Perth with reasonable land holdings and rentable older houses. Likewise suburbs where there have been zoning changes and infrastructure spending can still provide opportunities for good buying.