Firm identifies riskiest suburbs for unit buyers

Adam Smith 14 February 2018 NEWS

A new analysis has sounded a warning over off-the-plan properties.

The study by RiskWise Property Review has identified five key risk factors it says create poor off-the-plan investment environments. The firm warned against buying off-the-plan units in areas with poor economic growth, oversupply and high proportions of new units and a high renter ratio. It also asserted that houses would typically outperform units in the same suburb, and that inner-ring suburbs typically saw poor capital growth compared to middle-ring suburbs.

The firm compiled a list of the 100 riskiest off-the-plan suburbs across Australia, citing growing oversupply as a major risk factor.

Should you invest in off-the-plan properties?

"The widespread oversupply issue is universally acknowledged by banks, including the Reserve Bank of Australia, who have all compiled 'blacklists' for postcodes that are suffering from potential unit saturation. Lenders will require a much higher deposit as security on their loan, or they turn down a loan application entirely," RiskWise said in a release.

State Suburb New units next 24 months New units next 24 months as percentage of existing units
NSW Zetland 2,332 39.8%
NSW Epping 2,460 42.0%
NSW Holroyd 3,184 853.6%
NSW Schofields 1,389 754.9%
QLD Brisbane City 3,201 38.5%
QLD Fortitude Valley 1,040 23.6%
QLD South Brisbane 2,145 49.7%
SA Adelaide 1,720 20.1%
VIC Southbank 2,212 12.5%
WA Perth 1,151 13.7%

The firm's top 10 riskiest off-the-plan suburbs prominently featured Sydney and Brisbane suburbs, a result RiskWise said was unsurprising.

"In 2017, over 5300 units were completed in Brisbane, with another 11,000 in construction. What we’re currently seeing on the market is a lot of incentivised advertising, from offers of full furnishings included, through to a free car on settlement," RiskWise said.

"We would advise any investors looking at off-the-plan purchases to know what to look for and the degree of risk involved. Buyers should arm themselves with an in-depth analysis on the suburb’s ability to absorb the new unit supply, and the potential impact on future capital gains."

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