danger sydney and melbourne
The nations two largest cities have areas where there are an oversupply of units. Image – Canva.
  • Danger zones are areas where units are oversupplied
  • Investors are advised to be wary of the risks of rental vacancies and capital loss
  • There is more attention on houses from investors

Sydney and Melbourne both have areas at risk of becoming “danger zones” for buyers and investors due to an oversupply of units, according to research from BuyersBuyers.com.au and Riskwise Property Research.

BuyersBuyers.com.au co-founder Pete Wargent said, “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.

“The danger areas aren’t limited to the CBD but are rather found where there are clusters of new developments.”

Founder of RiskWise Property Research Doron Peleg said unit supply is a factor landlords should be wary of.

“Investors should be wary about the risk of rental vacancies, and capital loss, particularly investors considering new or off-the-plan purchases.”

Housing focus

Investors have turned their attention to houses over the past 18 months, reflecting an understanding of the risks, said Mr Wargent.

“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”

Pete Wargent

“Established units can still be a solid investment in supply-constrained areas, especially in the largest capital cities, but it’s 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,” he said.

Top danger zone suburbs 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%
Epping 2121 806 11.9%
Burwood 2134 552 9.2%

Source: RiskWise Property Research, CoreLogic

Mr Peleg of RiskWise Property Research said, “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.”

Top danger zone suburbs 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%
Brunswick 3056 882 12.2%
Burnley 3121 770 7.2%
Blackburn 3130 629 19.1%
Collingwood 3066 541 14.8%

Source: RiskWise Property Research, CoreLogic

Mr Peleg said, “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.

“With interstate migration to Queensland taking its toll, we have seen double-digit declines in unit rents for inner Melbourne.”

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