How do you see the property market going in Australia?
How do you see the property market going in Australia?

Australia’s 66 ‘danger’ suburbs

THESE are the 66 most dangerous suburbs in Australia to buy a house.

From crowded unit markets in the Sydney, Melbourne and Brisbane inner cities to still struggling towns in regional Queensland and Northern Territory, the warning signs are clearly visible, according to hotspotting.com.au.

The property research firm's latest Price Predictor Index uses sales volumes to predict future price movements - more sales point to price increases, falling sales to price declines.

"Sales volume is a precursor to prices, that's why it's quite a valuable indicator," said Hotspotting managing director Terry Ryder.

"The wind-down in Sydney was obvious well ahead of showing up in prices. Sydney peaked really in terms of sales volumes in 2015 and has been gradually tapering off. It was only last year we started to see it reflected in the price data."

The report lists a total of 66 "danger" suburbs - 17 in NSW, seven in Victoria, 26 in Queensland, three in Western Australia, three in Tasmania and 10 in Northern Territory. South Australia and the Australian Capital Territory escaped unscathed.

The strongest concentrations of danger suburbs were in the Sydney city and Parramatta areas, the Brisbane and Melbourne inner cities, and in the Queensland regional towns of Mount Isa and Gladstone, which have eight and six danger suburbs respectively.

"The ones to avoid are primarily in the Sydney apartment market and the Brisbane inner-city apartment market," Mr Ryder said.

"Then there's still some in regional Queensland and those areas impacted by the mining sector, [although] there are fewer than there were. A number of Queensland regional markets are actually showing signs of recovery."

The crowded CBD apartment markets are in for a rough time over the next two years, with rising supply coinciding with falling demand from buyers and a strong reduction in sales.

 

Inner-city unit markets are in for a rough time.
Inner-city unit markets are in for a rough time.

On the plus side, things are looking up in Western Australia.

"Until recently we used to have quite a number of danger suburbs in Perth but we don't anymore," Mr Ryder said.

"There are very strong signs of recovery. It's doing the exact opposite of the two biggest cities on the east coast. It's on its own cycle, which is often the case. Also in regional WA, Karratha and Port Hedland until recently were in danger but they're showing signs of uplift again."

Adelaide doesn't have any danger suburbs and Mr Ryder said it was a "very promising market" set to show growth in the next five years "once investors realise what's on offer".

"We tend to regard Adelaide as the most underrated city in Australia," he said. "The SA economy is quite strong, much better than people realise, and it's improving all the time. Their property market is very solid, very good value for money, much better rental yields than bigger cities."

Canberra, too, is a rising market.

"It's very solid, very low vacancies, rents have risen a lot in Canberra and that's often a precursor to price growth," Mr Ryder said.

Mr Ryder said the biggest story overall was the growth in regional markets, particularly in NSW and Victoria, as buyers and investors spill out from the overpriced capital cities.

"It's quite a normal pattern," he said. "When the capital city has a big property boom it levels out to the regions with a time lag. It's not unusual with Sydney and Melbourne winding down to see regional cities like Newcastle and Geelong very strong due to the ripple effect."

It comes after data from property research firm CoreLogic showed national median house prices fell at their fastest annual rate since 2012 in July.

The 0.6 per cent month-on-month fall brought the annual decline to 1.6 per cent, with prices now 1.9 per cent below their September 2017 peak. CoreLogic said the weakness was driven by long-running declines in Perth and Darwin and an acceleration of the rate of decline in Sydney and Melbourne.

 

Prices are tipped to continue falling until 2020.
Prices are tipped to continue falling until 2020.

A number of major banks have recently downgraded their forecasts for the Australian housing market. NAB predicts house prices will flatten in 2020, with a peak-to-trough fall of 6.5 per cent in Sydney and 2.5 per cent in Melbourne.

ANZ said it expects to see peak-to-trough declines of around 10 per cent in both Sydney and Melbourne in the same period. AMP Capital chief economist Shane Oliver believes Sydney and Melbourne will see declines of 15 per cent while the national average will fall by 5 per cent.

The Reserve Bank this week kept the official cash rate on hold for the 24th month in a row - technically 22 meetings - marking the longest ever period without a change.

The RBA last cut the cash rate to its record low of 1.5 per cent in August 2016, after an earlier cut to 1.75 per cent in May. There has not been an official cash rate increase since November 2010.

Experts believe the cash rate won't move until at least late 2019 or early 2020. Despite no official cash rate move for two years, a number of smaller lenders have been lifting their rates to cope with higher wholesale funding costs.

AUSTRALIA'S DANGER SUBURBS

(Suburb, median price, H = house, U = unit, SNR = statistically not reliable)

NSW

• Breakfast Point - $1.2 million (U)
• Carlingford - $1.435 million (H) $720,000 (U)
• Chippendale - $735,000 (U)
• Epping - $1.81 million (H) $850,000 (U)
• Ermington - $1.35 million (H) $775,000 (U)
• Forest Lodge - $1.16 million (U)
• Harris Park - $505,000 (U)
• Haymarket - $905,000 (U)
• Homebush - $660,000 (U)
• Homebush West - $625,000 (U)
• Mascot - $925,000 (U)
• Parramatta - $655,000 (U)
• Rhodes - $880,000 (U)
• Waterloo - $850,000 (U)
• Wentworth Point - $720,000 (U)
• Wolli Creek - $755,000 (U)
• Zetland - $850,000 (U)

Victoria

• Carlton - $375,000 (U)
• Collingwood - $550,000 (U)
• Docklands - $550,000 (U)
• Hawthorn - $2.35 million (H) $530,000 (U)
• Hawthorn East - $2.43 million (H) $605,000 (U)
• Melbourne CBD - $455,000 (U)
• North Melbourne - $505,000 (U)

Queensland

• Bowen Hills - $470,000 (U)
• Fortitude Valley - $430,000 (U)
• Hamilton - $1.3 million (H) $495,000 (U)
• Kangaroo Point - $510,000 (U)
• Kelvin Grove - $420,000 (U)
• Milton - $410,000 (U)
• South Brisbane - $570,000 (U)
• Clermont - $150,000 (H)
• Collinsville - $95,000 (H)
• Gladstone Central - SNR (U)
• Glen Eden - $310,000 (H)
• Kin Kora - $300,000 (H)
• Menzies - SNR (H)
• Miles - $160,000 (H)
• Miles End - SNR (H)
• Mornington - SNR (H)
• Parkside - $230,000 (H)
• Pioneer - SNR (H)
• Roma - $235,000 (H)
• Soldiers Hill - $275,000 (H)
• South Gladstone - $240,000 (H)
• Sun Valley - SNR (H)
• Sunset - $190,000 (H)
• Townview - SNR (H)
• Wandoan - SNR (H)
• West Gladstone - $180,000 (H)

Western Australia

• Carey Park - $215,000 (H)
• Kalgoorlie - $305,000 (H)
• Kambalda - $115,000 (H)

Northern Territory

• Bellamack - $570,000 (H)
• Darwin City - $410,000 (U)
• Durack - $455,000 (H)
• Johnston - $545,000 (H) $375,000 (U)
• Katherine - $320,000 (H)
• Larrakeyah - $465,000 (U)
• Muirhead - $650,000 (H)
• Parap - $440,000 (U)
• Rosebery - $500,000 (H)
• Zuccoli - SNR (H)

Tasmania

• Queenstown - $67,000 (H)
• Rosebery - $75,000 (H)
• Zeehan - $82,000 (H)

Source: Hotspotting Price Predictor Index Winter 2018.