Australia’s Top 10 Oversupply Areas

Covid-19 has turned property demand such that new research maps ‘Danger Zones’ in the propertly market.

COVID-19 has led to an immediate (if perhaps temporary) shift outwards in the demand for housing, such that experts have identified two risks property owners face.

In some location there is now the risk of negative equity (where a house is worth less than the mortgage).

And COVID-19 has increased properties’ cash-flow risk, with vacancy rates at an all-time high in May at 16.2 per cent.

Riskwise Property Research has produced research showing Australia’s Top 10 Danger Zones

The table below lists the riskiest areas in the country in terms of oversupply, based not only on the supply itself but also on low demand for rental apartments. 

State	Post code	Suburb	New units next 24 months	New units next 24 months as % of units
VIC	3000	Melbourne	4,744	13.6%
VIC	3008	Docklands	1,307	12.0%
NSW	2020	Mascot	804	13.3%
NSW	2155	Rouse Hill	1,661	200.4%
NSW	2150	Parramatta	1,553	13.2%
NSW	2250	Gosford	1,859	72.9%
NT	800	Darwin	1,204	32.0%
QLD	4101	West End	1,211	26.0%
QLD	4217	Surfers Paradise	2,779	14.0%
SA	5000	Adelaide	1,266	12.9%

Many of these risky locations are at the confluence of inner-city locations and off-the-plan purchases

According to CoreLogic, the portion of stock advertised across Melbourne saw a large jump from 3.2 per cent of listings advertised in April, to 3.6 per cent over May, representing a total rent listing uplift of more than 3,000 across Melbourne, up to about 27,000 properties for rent over the month, corresponding to a rise in vacancies and falling rental prices.

In Sydney, Mascot is still reeling from the effects of oversupply alongside construction defects where during the December 2019 quarter prices fell 4.6 per cent to $880,000.

Surprisingly, Gosford entered RiskWise’s 2020 list of Top 10 Danger Zones largely due to oversupply of units (at more than 72 per cent of existing stock) plus the fact that many of these units are unsuitable for families.

In Queensland’s Surfers Paradise, where houses with pools are the preferred option for residents, the unit market has taken a hit as COVID-19 materially impacts the tourism industry.

Rental values have also slumped across the country, according to CoreLogic falling 0.5 per cent in the June quarter – the sharpest decline in two years. In addition, unit rents have been hit the hardest with falls in both Sydney and Melbourne of 2 per cent over the past three months.