Sydney and Melbourne suburbs with a looming oversupply of apartments have been identified as the top 10 danger zone suburbs, according to a national property buyers’ agency.
BuyersBuyers co-founder Pete Wargent said there had been a “race for space” in the past 18 months as buyers abandoned high-density living in Australia’s most populous cities.
Wargent said while this had been good news for house prices, unit markets in high-supply areas were a riskier investment.
“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,” Wargent said.
"The danger areas aren’t limited to the CBD but are rather found where there are clusters of new developments.”
New apartments in the next two years
| NSW | No. of Apartments | As % of existing stock |
|---|---|---|
| Schofields | 3397 | 115.7% |
| Gosford | 1619 | 28.2% |
| Rouse Hill | 1274 | 88.2% |
| Zetland | 1110 | 6.3% |
| Liverpool | 893 | 10.6% |
| Epping | 806 | 11.9% |
| Burwood | 552 | 9.2% |
| Victoria | No. new apartments | As a % of existing stock |
|---|---|---|
| Boxhill | 1833 | 25.5% |
| Footscray | 1531 | 27.5% |
| South Melbourne | 1056 | 21.1% |
| Coburg | 970 | 26.9% |
| Preston | 940 | 21.6% |
| Docklands | 933 | 8.3% |
| Brunswick | 882 | 12.2% |
| Burnley | 770 | 7.2% |
| Blackburn | 621 | 19.1% |
| Collingwood | 541 | 14.8% |
^Source: Riskwise Property Research, Corelogic
RiskWise Property Research founder Doron Peleg said unit supply was a factor that landlords needed to be aware of.
“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,” Peleg 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.
“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.
“We have seen high vacancy rates around Docklands, the CBD, the inner south, and other parts of inner Melbourne for some time. However, with interstate migration to Queensland also taking its toll, we have seen double-digit declines in unit rents for inner Melbourne.”
Largest monthly rise in vacancy rate within a capital city
| Rank | City | Region |
|---|---|---|
| 1 | Gold Coast | Gold Coast Hinterland |
| 2 | Sydney | Sydney Inner City |
| 3 | Brisbane | Kenmore-Brookfield-Moggil |
| 4 | Sydney | Ku-ring-gai |
| 5 | Sydney | Leichardt |
| 6 | Darwin | Litchfield |
| 7 | Perth | Mandurah |
| 8 | Sydney | Baulkham Hills |
| 9 | Perth | Swan |
| 10 | Melbourne | Maroondah |
^Source: Domain
Nationally the residential vacancy rates have held steady for the past five consecutive months, the longest period of stability since 2017, according to Domain’s rental vacancy rates report.
While most capitals recorded a drop in vacant rentals, Domain senior research analyst Dr Nicola Powell warned that Sydney and Melbourne remained a tenants’ market.
Four Sydney markets were in the top 10 for highest rise in rental vacancy rates for September 2021, while rental listings have also increased marginally during the protracted lockdown.
Parramatta had the highest vacancy rate in Sydney at 3.7 per cent, while Melbourne’s Stonnington East was up at 6.7 per cent.
But the picture is a bit brighter in other parts of Australia.
Powell said outside Melbourne and Sydney, rental markets would be operating in a landlords’ market. Vacancy rates in Perth and Adelaide are at multi-year lows, while Canberra, Darwin and Brisbane remain close to multi-year lows.
“As the states and territories move towards their mass vaccination targets, the roadmap to opening up is becoming more clear,” she said.
“This will be a welcome boost to landlords, as the rental market becomes more competitive ... tenants will likely face the prospect of higher rents.”
