The suburbs to avoid if you don’t want to lose a lot of money buying property

Property investors are much more likely to lose money buying high-rise properties in certain parts of Australia’s biggest cities.

Record high immigration and extremely tight rental vacancy rates have driven up house prices.

But when it came to apartments, there was a greater chance that there would be bad news for sellers, especially if they were apartments close to the city center, in an area with many high-rise residential towers.

CoreLogic’s latest Pain and Gain report shows that 90 percent of loss-making sales were in units, with parts of Western Sydney, Melbourne and Perth particularly at risk.

Head of research Eliza Owen said the higher sales volume from recent buyers was also a sign of mortgage stress, following a series of interest rate rises.

“While the share of short-term resale fell marginally quarter-on-quarter, resale with a holding period of three years or less reached a ten-year high in the year to September,” she said.

‘An increase in short-term resales occurred against a backdrop of rapidly rising interest costs, and this may reflect higher mortgage stress.’

Across Australia, a fifth of loss-making sales to investors occurred in the Parramatta, central Melbourne and central Perth council areas.

“Despite strong rental growth in these markets in recent years, values ​​in Melbourne and Parramatta have been flat or declining over the past five years,” CoreLogic said.

Suburbs with a higher proportion of high-rise residential towers tend to have a higher percentage of loss-making sales, because a greater supply of units means potential buyers have more choice and a greater ability to demand a discount.

Parramatta

In Sydney, a fifth of loss-making unit resales during the September quarter occurred in the Parramatta council area in the city’s west.

Investor rental properties accounted for three-quarters of loss-making sales in Parramatta, with owners typically selling after seven years and two months, making an average loss of $45,550.

In the Parramatta Local Government Area, 22.5 per cent of homes were sold at a loss, compared to just 1.4 per cent on Sydney’s northern beaches.

The Parramatta news was revealed on Thursday – a fortnight after New South Wales Premier Chris Minns announced he wanted to turn the Rosehill Gardens Racecourse into a new ‘mini-city’ with 25,000 new homes, mainly apartments next to a new metro station.

The Parramatta council area also includes Sydney Olympic Park, a suburb where cracks were discovered in the Opal Tower apartment building five years ago.

Parramatta’s median apartment price of $612,462 is significantly cheaper than Sydney’s median price of $836,220.

Loss-making sales are more common in cheaper areas near the city.

Melbourne

In the Melbourne city council area, as many as 41.1 percent of homes were sold at a loss.

Of Melbourne’s loss-making resales in the three months to September, almost a quarter, or 23.3 per cent, took place in central Melbourne.

Units made up all loss-making sales, with a relatively long holding period of nine years and six months, and an average loss of $60,000.

Melbourne’s Docklands area has an average unit price of $596,488 – a level slightly below Melbourne’s median price of $610,490.

Perth

In the municipality of Perth, 52.3 percent of homes were sold at a loss.

Of loss-making unit resales in Perth, 23.1 per cent occurred near the city centre, with apartments typically sold after 11 years, at an average loss of $67,000.

In central Perth, the average unit price is $457,769 – in line with $457,296 in greater Perth.

Australia

Of the loss-making sales across Australia in the September quarter, 90 percent were units.

In Darwin, 50.7 per cent of apartments were sold at a loss, despite the capital’s average unit price of $380,761 being the cheapest.

This was well above the 25.9 percent loss rate for units in Perth, the 18.4 percent loss rate in Melbourne and the 14.1 percent loss rate in Sydney.

Across all property types, those who made a profit were more likely to have an average profit of $298,000, while those who lost money were likely to have an average loss of $40,000.

Properties sold within three years of purchase accounted for a fifth of this all loss-making resales in the September quarter.

Of the 86,000 homes sold in three months, 93.5 percent were sold at a profit, while only 6.5 percent were sold at a loss.

Profitability was above the decade average of 90.8 percent, despite the Reserve Bank of Australia raising rates 13 times in 18 months, taking the cash rate to a 12-year high of 4.35 percent in November.

A record 518,100 overseas migrants moved to Australia during the last financial year and the national rental vacancy rate fell to just 1.1 per cent in November.