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|
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.