History reveals the suburbs to avoid – Anna Porter

History reveals the suburbs to avoid – Anna Porter

The media constantly declares certain suburbs as hotspots for investors based on some spurious research. It is compelling to look back and fact check.  The Suburbanite negative growth report will expose the areas investors must avoid based on results.  Anna Porter walks us through the results that reveal a 37% increase in the number of suburbs with falling values.

Transcripts:

Kevin:   Earlier in the show, we talked about… we looked ahead at what suburbs are likely to fall in value over the next few years. Always interesting to look back and it’s staggering when you do that. Media constantly, of course, declaring certain suburbs as hot spots for investors. They often fail to acknowledge that it’s not always the case. The Suburbanite negative growth report exposes some areas that investors should avoid, and should be aware of. Joining me to talk about that report, Anna Porter from Suburbanite. Anna, thank you very much for your time.

Anna:   You’re welcome.

Kevin:   Firstly, tell me how you went about putting this research together. What was your source?

Anna:   So, we looked at the Core Logic and SQM data and collated it across both those data forces, and really, to be honest, it was just a lot of time. And our property and research team just pouring through data for weeks and weeks on end. And then figuring out which markets had declined, and we’ve ruled out any markets that have had one percent or less decline because that tends to be a statistical anomaly. So, if anything had more than one percent change in the negative.

Kevin:   You came up with about 1400 I believe, is that right?

Anna:   Little bit over 1400, yes. So, it was actually an upside about 37% from last last year’s list, so it was more suburbs that hit the list this year than for the year before. It’s quite interesting.

Kevin:   I guess what’s really interesting, for me and for our audience I believe, is to identify and I’m going to ask you to give me the top five learnings you took out of this. But if you can also quantify it for me? What are the lessons we’ve learned from those falls, and what do they tell us about the future Anna? Could you maybe run through the top five?

Anna:   Yeah, sure happy to give you the top five. And something very interesting overarching is in New South Wales we actually saw 237 more suburbs hit the list, and for Victoria an extra 118 so clearly there’s a big change in those two markets, and the least changes are actually seen in a ACT and WA. So, that would talk a little bit to stability in those two markets.

Kevin:   Okay well, look does … let me ask you a question about that Sydney and Melbourne in particular? Were they the regional areas of New South Wales or were they actually in Sydney and Melbourne?

Anna:   That was both. It was throughout the metropolitan Sydney and metropolitan Melbourne, and then reaching out to areas like say your Wollongongs and your Geelongs and areas like that. Some of those started to hit the list, but more so in the metro area than the regional areas is what we were quite surprised at really.

Kevin:   Well, give me your top five.

Anna:   Top five, yes let’s do it. So, let’s start in those two powerhouses New South Wales. So, we saw the unit market … we’ve gone through unit and housing data, but I’m thinking that the unit market here is most interesting in Wollongong. So, the two five zeros are a Postcode which encompasses Wollongong CBD and Mangerton. The unit market took a 43.9% dive in values over the 12 months through 2018. So, what’s underpinning that is … it’s a couple of things. There’s a bit of a turn in the market anyway which is a cyclical thing since Sydney and Wollongong markets are starting to come off the boil, and we’re starting to see a change of gear. But, the reason why this markets been hit hard so hard in particular, and it’s double digits there, is because of an oversupplied unit stock.

Anna:   So, when you couple a changing market cycle with a big oversupply issue this is when we start to see the real fallout here. It misses areas that … we often say to people when they’re starting their investment journey, “Be cautious of the unit markets. Be cautious of over supply markets for this exact reason.” Because when things turn a corner …” and let’s give this context. There’s been good growth coming through that market for the last three or four years, but now the retraction is more significant than say many other market’s in the area of I’ve seen.

Kevin:   Number two?

Anna:   St Kilda houses was an interesting one that we’ve seen. So, that’s had a negative growth of 28.7% that’s just under 30% negative for St Kilda houses. Now by all means St Kilda is a very sought after desirable suburb. So there’s nothing there that would intrinsically say that it’s going to underperform. It is just that timing in the cycle, couple that with we’ve got a royal commission coming through the market, we’ve got lending restrictions, and you’re in a market there that’s not a cheap market it’s quite unaffordable. Those things start to have that layered impact and can really hit it fairly hard. So, anyone living or buying in St Kilda if they’ve got an eight to ten year view you’ll be just fine since it’s fundamentally a great area. But right now there’s certainly some pain to push through in that area.

Kevin:   Number three?

Anna:   So, number three’s an interesting one. It’s actually the postcode is 4510 and I’m sure all your listeners know exactly where that is of course.

Kevin:   Queensland of course somewhere. I can tell by the four.

Anna:   So, it’s Beachmere units. Now Beachmere’s right near the Deception bay so the reason I found it interesting have a 49.8% negative growth. So that’s quite significant, so basically what we are saying is that half the value has been gashed over the last 12 months, that is quite significant and the reason I find that really curious is that there is a lot of investment firms in the market that are strongly recommending investors get in to units up around between Deception Bay in those sort of areas.

Kevin:   Goodness.

Anna:   I know, and what we’re seeing which is what concerns me the most is why are firms recommending people to invest in areas that is significantly going backwards and fundamentally the lack of employment, there’s lack of population growth, there’s a lack of these drivers that will create a turnaround so we see that there’s a couple of years here that aren’t going to be good for this market. It’s not gonna change overnight so you’ve gotta wonder if the investors firm is actually working for the developer or working for the investor when they’re recommending it.

Kevin:   Well fairly, obviously for the developer so …

Anna:   That would be whats indicated because there is absolutely no reason I would encourage someone to get into a market that’s seeing that much of decline when the fundamentals don’t support that turning around overnight.

Kevin:   Okay, so that’s Beachmere Units, what’s number four?

Anna:   Number four is, it’s a bit of a tale of two cities. So we’re in Tasmania now and it’s East Launceston Units so that’s the post code of 7250 is encompassed in this data and that has had negative growth of 14.2%. Now the reason I said the tale of two cities is now we’re hearing about all this great growth coming out of the Tasmanian market and through, hubs like Launceston but then the unit market here is really struggling so we’ve gotta be mindful of it, it certainly has to be some nous on the ground by investors to get the right asset in the right market that’s gonna perform because… just because some of the markets are performing doesn’t mean it’s going to be the whole market. You’ve really still got to be careful.

Kevin:   It’s even the class of the market too, whether it’s houses or units as well. Isn’t it?

Anna:   Exactly, that’s a very true story.

Kevin:   Okay, number five?

Anna:   Number five is one of my favourites, this is units in Canberra. So we’re seeing in particular the suburb here that I’ve got is Phillip at negative 26.4%, we’ve even seen through Canberra CBD has had a significant decline in unit values in the city at 15.6% negative. Now, this again is about the right asset class. So Canberra as a capital city is actually going up in value, we had a lot of trouble finding many suburbs at all that had negative growth in housing sector so there is strong growth coming through yet the unit market is still retracting and double digits, it’s not just a little bit. This is significant. That tells a story that even when the housing market going up, units are not an appropriate product to Canberra, they’re not performing well, it’s not the desired product and there’s too many of them being built so again it’s a supply issue and its having a real impact on that sector.

Kevin:   Yeah, wonderful insights Anna. There’s so many, we haven’t got the time to go through the 1 400 that you’ve found but it’s a great report. I imagine it’s available at your website?

Anna:   Yes, it sure is at suburbanite.com.au or on our Facebook page. We certainly can give people access to that, or just send us an email and we can send that whole report over so you can see if your suburb is on the list.

Kevin:   Very good, that is s-u-b-u-r-b-a-n-i-t-e .com.au, Anna Poter has been my guest from Suburbanite. Thank you Anna, talk soon.

Anna:   You’re welcome.

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Kevin Turner
kevin@realestatetalk.com.au
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