‘Residential dustbowls’: The Perth postcodes on an investor blacklist

Some of Perth’s most popular suburbs have appeared on a national property industry blacklist with investors warned of the risk their value will fall.

Almost half of the 111 suburbs and towns declared “no-go zones” for buyers by national investment advisory group Positive Property were in Western Australia.

A mix of regional towns, inner-city areas and suburbs including Scarborough and Brabham make the list, which is dominated by sprawling housing estates on the urban fringe. Perth was the city with the most suburbs on the list at 27.

The report was based on an analysis of multiple economic metrics and housing market indicators across nearly 15,000 Australian suburbs, along with council and building data.

Across the nation Port Hedland ranked fourth with Dayton, Broome and North Coogee also appearing in the top 10 places investors should avoid in Australia.

Australind, Cable Beach, Nickol and Burswood were considered among the 20 worst areas for investing.

Futorologist Rocky Scopelliti said areas like Port Hedland, which are heavily reliant on specific industries such as mining, faced heightened risks of becoming ‘residential dust bowls’ during economic downturns when these industries faltered.

“The rapid decline in economic activity can lead to job losses, population decline, and reduced property values,” he said.

“Meanwhile newer developments on the urban fringe, such as in Yanchep and Alkimos, may struggle to attract and retain residents if the development of necessary infrastructure—such as schools, healthcare facilities, and shopping centres—lags behind residential construction.

“This mismatch can lead to dissatisfaction, reduced demand, and eventually signs of urban decay.

“In some cases, an over-supply of new homes can lead to a surplus in the market, which may depress property values and lead to higher vacancy rates, as has been seen in parts of the outer suburbs like Banksia Grove and Byford.”

Buyers’ agent Peter Gavalas said despite east coast commentators seeing risk in the current value of the local market in the face of rapid growth, it was still well priced.

“The negative news on mining recently has probably provided more artillery for experts to portray the risk in the Perth property market, but our economy is so much more diverse in 2024 and we aren’t just relying on mining as we have been in the past,” he said.

However, he agreed there were increased investor risks in newer suburbs like Wellard and Bennett Springs.

Limnios Property Group managing director James Limnios said most new rental housing stock in Perth was being produced by interstate investors purchasing house and land packages in the outer city fringe areas.

“These house and land packages are financially attractive to eastern states investors because they can deliver higher rental yields compared to the eastern states,” he said.

“However, over the longer term, these investors fail to understand that these new homes in the outer city fringe areas could quickly be turned into a residential dustbowl because there are no major employment hubs in these areas and as a result [they] are very vulnerable to any economic downturn.”

CoreLogic research director Tim Lawless said as affordability became more stretched and state governments shied away from the expense associated with sprawling infrastructure required to maintain a geographically distributed population, there was likely to be renewed focus on establishing higher densities in Perth.

He said a key factor in Perth’s median dwelling value (now $785,250) overtaking Melbourne’s ($776,044) last month was the lack of apartments in the west.

“Melbourne has densified more substantially and rapidly than the mid-sized capitals. In August, CoreLogic estimates a third of housing stock in Melbourne falls within the multi-unit sector, compared with 16 per cent of housing stock in Perth,” he said.

“There hasn’t been much progress in densification across Perth. Over the past 15 years, the composition of Perth dwellings moved from 13 per cent within the multi-unit sector to 16 per cent.”

Annual dwelling completions data showed this trend perpetuating, with the multi-unit sector across WA representing just 9.5 per cent of completions over the 12 months to March 2024, less than half the national average of 33.8 per cent.

Overall, lending to investors in the west doubled during the past year when compared to the $732 million of July 2023, and has surged by around $1 billion per month compared to early 2021.

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