The top 10 danger zone suburbs in the housing market

The top 10 danger zone suburbs in Australian property at the moment are all areas where units are oversupplied.

There has been a ‘race for space’ over the past 18 months, sending house prices higher, but unit prices in some high-supply areas look riskier. 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 one state or city but are instead found where there are clusters of new developments.

Vacancy risks for landlords

Unit supply is a factor landlords need to be wary of. We have compiled our top 10 danger zone suburbs where investors should be cautious about the risk of rental vacancies and capital loss, particularly investors who consider new or off-the-plan purchases.

The CBD areas of the capital cities have been a risk area for some time, but our danger zone list also incorporates locations far further afield, such as Gosford and Broadbeach.

StateSuburbPostcodeNew Units in the Pipeline
(24 months)
As a % of Existing Stock
VICBox Hill3128183325.5.%
NSWRouse Hill2155127488.2%
VICSouth Melbourne3205105621.1%
Figure 1 – Top 10 danger zone suburbs

Investors have turned their attention to houses over the past 18 months, reflecting an understanding of the risks. Established units can still be a solid investment in supply-constrained areas, especially in the largest capital cities.

It is 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. Conversely, there tends to be more risks in a generic high-rise of higher-density developments.

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.

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