What Does a Risky Suburb Look Like?

 

Different investors are looking for different characteristics when they are building their property portfolios. Some are looking for a "fixer upper" some are looking blue chip and some want a property that may not grow in value as much but has a strong cashflow. What most every investor will agree on is that mitigating risk is a good thing. So what makes a property investment risky and how can we avoid a risky property investment. 

 

Recently www.news.com.au published this article showing that 4 Sydney suburbs top the list of the riskiest places to buy homes off the plan. In the article they identify the following suburbs as the top ten risky suburbs in questions:

 

  • Zetland, NSW

  • Epping, NSW

  • Holroyd, NSW

  • Schofields, NSW

  • Brisbane CBD, Qld

  • Fortitude Valley, Qld

  • South Brisbane, Qld

  • Adelaide, SA

  • Southbank, Vic

  • Perth, WA

 

What the article discusses is that these suburbs represent risk because of a temporary over supply of a certain type of asset into a market that may struggle to absorb that asset. The majority of the suburbs listed above have some concern of an over supply of units being built while Perth and Adelaide have been quite poor performers over the past couple years which would imply an off the plan property exchanged 2 years ago may be worth less by the time settlement comes up. There are different reasons which each suburb could be considered high risk but some due diligence and an understanding of the fundamentals that drive markets would make the risk clear.

 

What it comes down to is Supply vs. Demand. If there is too much supply of a certain product in a certain market, compared to the demand for that product, there is likely to be some risk around an investors ability to sell or tenant that property. 

 

We discuss this in more detail in our recent Coffee & Property episode 3 which you can view HERE!

 

 

 

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