‘Overpriced’ real estate: Worst suburbs to buy property in each capital city revealed

A bombshell report has flagged the worst suburbs in each capital to buy property in the current climate due to the higher risk of price falls. See the full list.

They’re the suburbs and types of housing that property buyers have been warned to “stay away” from due to higher risk of price falls after purchase.

Apartments on the urban-rural fringe, houses in areas with ample new property estates and those in “lifestyle” suburbs that boomed during the pandemic have been flagged as the riskiest capital city properties to buy right now.

New analysis from property research group DSR Data recently revealed the “worst suburbs” for home seekers and investors in the current climate of rising rates, with similar types of housing deemed risky buys in each capital.

Many were outer suburbs where there was recently an increase in higher-density apartments, such as Sydney’s Campbelltown and Penrith regions.

Houses in some suburbs in the Mornington Peninsula in Victoria were also considered risky, with local agents reporting property buyers were no longer streaming into those markets with the same gusto as they did during the early pandemic in 2020 and 2021.

Parts of the Mornington Peninsula south of Melbourne were considered risky locations to buy property.

There was a similar trend in some of Adelaide’s southern beaches and parts of Brisbane’s coastal north.

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.

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.

“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.

Some areas on the outskirts of Sydney have a high supply of apartments available for sale, relative to demand.

Real Estate Buyers Agents Association president Cate Bakos said Mornington Peninsula suburbs on the list, including Mornington, Blairgowrie and Dromana, were not good places to buy in for now because there were still “adjusting” to the aftermath of Covid lockdowns.

These markets had been extremely popular in 2021 due to a wave of inner city buyers moving there to make a sea-change. It resulted in incredible prices, Ms Bakos said.

That run of growth, coupled with interest rate cuts, have made these markets much less accessible at a time when buyers’ have reprioritised access to CBD workplaces, Ms Bakos said.

“They simply had so much growth over such a short period of time. They’re still adjusting to that,” she 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.

Outside of certain pockets, most parts of the country have a low supply of housing available, resulting in a strong demand at auctions. Picture: Julian Andrews

“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.”

He said investors should be wary of apartments in Sydney’s outer southwest, a market traditionally dominated by low-density housing.

“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”.