Be wary of costal property and so-called population hotspots when buying property – that’s the message from a new report from property analyst Terry Ryder, who has indentified 10 “no go zones” for property investors.
The list includes a number of surprises, with popular coastal towns including Byron Bay and the Sunshine Coast and Gold Coast regions picked out as having overheated markets, oversupply and poor price growth.
“One of the least known factors in Australian real estate is that iconic sea change locations tend to have poor capital growth records,” Ryder says.
To qualify as a no go zone, a suburb or region might have poor capital growth, overheated prices, poor employment, environmental concerns or poor infrastructure.”
Ryder says his list should be taken as a warning for investors that strong research of the trends behind the hype of a particular market is crucial.
“It’s always a key theme of mine that investors need to do lots of their own research. If you simply believe what you are reading and hearing, you’re going to make poor decisions.”
He says that is particularly true of regions that have big property “propaganda machines” such as the Gold Coast and Sunshine Coast.
“They are constantly pumping up their markets which in fact perform quite poorly.”
Another major surprise on the list is the inclusion of Melbourne’s prestige suburbs, such as Toorak, Armadale and Brighton. While supply is seen as scarce in these markets, Ryder argues prices have become overheated recently and are likely to be volatile in the future.
Another region likely to be unhappy with its inclusion on the list is the Sutherland Shire, just outside Sydney. Ryder says the daily commute for those who travel to Sydney is awful, with 90 sets of traffic lights between the Shire and the CBD.
Another surprise is the mining town of Mount Isa in Queensland, which Ryder argues has become overheated and faces some worrying problems with pollution and health issues.
Ryder says buyers need to be careful they don’t overestimate the growth potential in mining markets, which can go from boom to bust conditions in as little as six months.
“That’s why we don’t recommend buying in mining times. We’ve seen that cycle happen over the last couple of years where towns that were booming have gone the other way very quickly, with lots of empty houses.”
The publication of Ryder’s list comes at a time when many property investors are buying interstate, largely based on what they see on the internet.
While he says investors should “regard the whole of Australia as their market” he says careful research of the trends affecting an area should be combined with the use of professional property inspectors (such as building surveyors and best inspectors) for the most thorough assessment of a purchase.
Region/Problems
Breakfast Point, NSW: Expensive, poor capital growth, community disputes
Byron Bay, NSW: Poor capital growth, volatile market, erosion
Gold Coast, QLD: Poor capital growth, oversupply, lack of affordability
Kalgoorlie, WA: Job losses, falling prices, pollution
Lyndhurst, VIC: Pollution, poor capital growth
Melbourne prestige suburbs, VIC: Volatile market, overheated
Mount Isa, QLD: Low returns, health issues, pollution
Roseberry/Zeehan, TAS: Toxic concerns, mining demise, volatile market
Sunshine Coast, QLD: Low affordability, oversupply, poor capital growth
Sutherland Shire, NSW: Poor capital growth, poor road links to Sydney CBD
Source: Hotspotting.com.au
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
