Blacklisted: ‘Sydney’s worst suburbs’ to buy a home

These are the riskiest Sydney suburbs in which to buy a home - blacklisted by those in the know.

Units in outer suburbs and houses in new estates in the northwest have been deemed Sydney’s riskiest properties for home seekers and investors owing to the higher prospect of value falls after settlement.

Some of the housing categories included in a new blacklist detailing the “worst suburbs” for property purchases included units in Penrith and Campbelltown.

Both regions have been historically dominated by freestanding houses, with experts revealing recent higher-density development did not always match home seeker preferences in those areas.

Units were also considered risky buys in Rouse Hill, in the outer northwest, and in St Leonards, where there has been large-scale development over a short period.

Other inclusions in the worst suburbs list compiled by research group DSR Data were houses in Marsden Park and Minto – both suburbs where numerous new estates have been built in recent years.

Units in Campbelltown have been included on a list of worst property purchases in Sydney.

DSR Data analyst Jeremy Sheppard said there were common themes in the areas that scored poorly for buyers seeking capital growth, including a supply of available homes that was well above underlying buyer demand.

The areas also tended to have a glut of certain types of housing, were fresh off a price boom and sales volumes were declining because buyers were turning elsewhere.

This made them poor locations for new purchases as there was a higher likelihood of value falls.

“They’re over supplied and overpriced. Two things that will knock demand out of any market,” Mr Sheppard said.

“In the case of high prices, if there has been too much growth recently and buyers can’t support any more price increases it knocks demand out of sales.

High density apartments in Penrith have also been included in the list.

“The next problem is oversupply, where the developers have gone berserk. They’ve been given open slather to build and build one type of housing just as rising interest rates are knocking more wind out of demand.”

Areas flagged on the DSR list were considered especially risky for buyers with small deposits as even a minor drop in value could result in a mortgage worth more than the value of their properties.

Homeowners in this position would then be in danger of owing the bank extra money after settlement if forced to sell their properties.

The DSR data was based on analysis of numerous demand and supply indicators, as well as sales volumes and market cycle timing.

It also took into account instances where comparable homes were priced well above alternatives in surrounding suburbs, suggesting the homes were more likely to be overvalued.

Mr Sheppard said areas with the worst demand to supply ratio may stack up well as lifestyle choices but, from a financial perspective, would only make sense for buyers prepared to hold onto the properties for the long haul.

“Over time, they will be fine, but the problems will come if they need to sell in the short term,” he said.

Buyers’ agent and director of PropertyBuyer Rich Harvey said it was hard to justify high-density unit purchases in outer suburbs in the current climate of rising interest rates and buyer caution.

“Take a cold shower and stay away,” he said. “If you’re an investor looking for capital growth I would not recommend units in far flung locations.

“Especially in the southwest, there are many land subdivisions in the region and more development (coming). If you’re buying an apartment that will be one of 4000, there will be no scarcity value, which will mean no capital growth”.

Buyer’s agent Rich Harvey said he wouldn’t recommend investing in units in outer suburbs.

Real Estate Buyer’s Agents Association of Australia president Cate Bakos said some of the weakest markets to purchase housing in right now were those enduring a hangover from the pandemic-era boom.

“The prices just went up too much. It was a frenzy and now it’s going the other way,” she said.

MORE: What continues to drive up Sydney home prices, latest PropTrack data

Originally published as Blacklisted: ‘Sydney’s worst suburbs’ to buy a home