Australia’s 5 worst housing markets for investment

For the past two years, the Australian property market and its booming prices have been an investor’s dream, but not all suburbs are created equal.

A new report from Suburb Help has highlighted the 40 worst suburbs for investors nationwide, ranking them as “soft.”

A definitely “soft” real estate market, according to the report, is a suburb where the average time on market is greater than 40 days, inventory levels are greater than six months, with those levels declining by less than three months over the course of the last year.

Suburbs were excluded from the ranking if they had fewer than 20 properties for sale.

Of the 20 housing markets in Australia that investors should avoid, Western Australia hosts half (10), the Northern Territory has six more and the rest of the list is filled by Victoria (3) and NSW (1).

Interestingly, despite being located next to one of Sydney’s fastest growing suburbs in terms of inventory and planned inventory, Box Hill, the only NSW suburb in the Vineyard ranking, has inventory levels that exceed 12 months.

Veronica Morgan, chief real estate strategist at Suburb Help, said identifying the perfect investment locations is crucial right now, especially as interest rates continue to rise, in order to maximize financial returns on investment.

“The reason real estate investors should avoid the suburbs in this report isn’t necessarily because they’re bad locations, but because they’re bad locations in May 2022,” she said.

She also noted that the suburbs featured in the report range from suburbs that are traditionally poor places to invest to previously attractive locations for investors that have deteriorated in recent times.

And although she said these areas could prove to be worthwhile investment locations in the future, Ms Morgan’s main advice to investors at the moment is “to avoid these markets because there are much better alternatives.

“Inventory levels have increased in all of these locations; and in some cases are extremely high,” she reported, while at the same time days on the market are high and often increasing as well.

“When you put these data points together, it suggests that prices in these places will either slowly rise over the medium term or pull back. In contrast, there are other sites in Australia that will deliver superior price growth,” she concluded.

The five investors in the Australian property market should avoid are:

  1. Yarrawonga, Moira (Victoria)

Homes in this Victorian border town fetched a median sale price of $665,000 in May, matching the 7.4% annual price growth the town has seen over the past 10 years. Each home will spend an average of 51 days on the market and inventory levels are currently 2.8 months higher than the same time last year at 6.9 months.

2. Diggers Rest, Sunbury (Victoria)

The last Victorian suburb in the top five, homes in Diggers Rest sold for a median sale price of $625,000 in May. Melbourne’s north-west suburbs have seen an average annual price growth of 8.2% over the past decade, and inventory levels are currently over 12 months old. Additionally, properties spend an average of 42 days on the market here.

3. Girrawheen, Wanneroo (Western Australia)

Homes in this northern suburb of Perth reached a median sale price of $380,000 in May 2022, and a broader look reveals that the area’s average annual price growth over the past 10 years is 3%. Additionally, inventory levels sit at 7.8 months, up 4.1 months from the previous 12 months, with each home spending an average of 61 days on the market.

4. Yokine, Stirling (Western Australia)

Yokine homes spent an average of 55 days on the market in May 2022 and, during the same period, sold for an average price of $800,000. Inventory levels are up 3.9 months from May 2021, currently standing at 8.8 months, while average annual price growth over the past decade is 4.2%.

5. Midland, Swan (Western Australia)

Midland, a suburb east of Perth, completes the top five. Homes in Midland sold for an average price of $355,000 in May 2022, with each home spending an average of 57 days on the market. Annual price growth over the past 10 years is 3.6%, with inventory levels at 10.8 months, an increase of 4.2 months from the same period last year.