22 Jan 2018

These are the No Go Zones, the areas experts say you shouldn’t invest in

QUEENSLAND has three regions that have been labelled No Go Zones for property investment - the suburbs and areas that new research cautions about buying in.

Property analyst Terry Ryder of Hotspotting has labelled nine areas in Australia as No Go Zones. The three in Queensland were Brisbane inner city, Brisbane north side and the high rise market on the Gold Coast.

It was the first time for several years that no regional, resource town in Queensland had been on the list.

Mr Ryder said one thing the No Go Zones had in common was oversupply.

He said it was one of the most overlooked issues by property investors, when really it should be one of the most important.

“Over-supply causes rents to fall and that drags down property values,’’ he said.

His report said the biggest single danger for property investors at the moment was buying apartments in some of the major cities.

“Given that Melbourne, Brisbane, Perth and Darwin already have – or are heading towards - major surpluses of inner-city apartments, and Sydney, Adelaide and the Gold Coast are trending in that direction, a good strategy for property investors is to simply avoid high-rise unit markets altogether,’’ he said.

“Most of suburbs we classify as danger markets in the Brisbane metro area are inner-city unit markets,’’ Mr Ryder said.

“The CBD and most near-city suburbs like Fortitude Valley, Woolloongabba, Kelvin Grove and South Brisbane have vacancy rates above 6 per cent at a time when major new supply is under construction.’’

Mr Ryder said tougher restrictions on lending had also had an affect on investors being able to buy, so sales levels had started to drop off.

At the same time, vacancy rates were rising from 6 per cent for the CBD in November 2015 to 8.7 per cent in November 2017.

“The current high vacancies and the likelihood that they will rise further as projects are completed, as well as growing evidence of declining values, means investors should avoid this market for the time being,’’ he said.

Brisbane’s north side, suburbs within 15km north of the CBD, made the No Go Zone list because of the high level of new construction of units and townhouses which had lead to a sharp increase in vacancies.

“It is not the whole north side but there are some parts of that market where vacancies are very high because developers built a lot of units and townhouses,’’ Mr Ryder said.

“It is temporary, I think 12 months form now a lot of it may have been absorbed but right now some of these places need to be approached with caution. As an investor if you are buying those places, it is going to be hard to find a tenant at a decent rental because vacancies are quite high.

“At the same time some of the locations which 12 months ago were included in this report with high vacancies, the vacancies have improved and so there is a prospect that 12 months from now that market will be looking better but right now it is one to be wary of.

“The one suburb bucking the trend and confusing the market is Albion,’’ he said.

“It’s median unit price has enjoyed an uplift of 10 per cent in the last 12 months and an average of 6 per cent per year for the past 10 years.’’

The Gold Coast high rise market was on the No Go Zone list. Mr Ryder said it had a poor track record on capital growth and a boom-bust history.

“In the lead-up to the 2018 Commonwealth Games, billions are being spent on infrastructure and major developments, creating jobs and demand for real estate.

“But at the same time the number of apartments being marketed has risen sharply.’’

While Mr Ryder said short term statistics looked good for the Gold Coast - there were low vacancies, increased rents and some price growth in unit markets in the last 12 months.

The market was being influenced largely by big projects currently under construction and the scenario could change when they were completed, adding massively to the pool of rental properties.

“The Gold Coast covers a large area - and its appeal is not restricted to beachside high-rise units. Houses in regular suburbia present better prospects. Many housing suburbs away from the Glitter Strip have delivered growth of 4 per cent to five per cent, per year in the last 10 years, far better than the high-rise markets.

“We recommend investors concentrate on the genuine residential suburbs inland and in the growth corridor heading north towards Brisbane.’’

Mr Ryder said many of the housing markets on the Gold Coast had shown growth.

He said while the areas he had identified as No Go Zones weren’t all dominated by unit markets it had evolved as a growing issue.

But he said there would be a time when the market bottomed and there were opportunities to buy, particularly for owner occupiers.

“If you want to live in an inner city apartment maybe 12 months from now might be a great time to buy at a generally good price.’’

 

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