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‘Negative growth traps’ for PMs, BDMs to avoid

21 February 2018 Sasha Karen
Negative growth

PMs and BDMs will have profit motives in mind when targeting new suburbs. However, there are areas in New South Wales to stay clear of as they have been earmarked for negative growth, a new report has found.

Suburbanite’s 2018 Negative Growth Report highlights some of Australia’s suburbs with biggest negative growth, which Suburbanite founder and director Anna Porter said investors could be unfairly persuaded to invest into.

“Each year, there are suburbs that are enlisted in the negative growth report that a number of investment firms still pitch to clients (often incentivised by hefty kickbacks),” Ms Porter said.

Ms Porter said that, across the country, NSW outperformed all other states, with only 12 markets showing negative housing growth and 16 with negative unit price growth.

In 2017, NSW housing markets saw cooling in some areas, coming off a period of growth between 2012 and 2016 and with more cooling predicted.

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The founder said: “The broader market saw further impact of the cooling effect in the latter part of 2017, and we expect the 12 months of 2018 to be a far more grim picture for the market, with the negative growth trend spreading further [out] the state.

“Having said this though, our historical research shows a trend of typically only 5 per cent [to] 10 per cent decline in values for most suburban and metro areas when the market hits this stage of the cycle.

“For those that have owned properties in the suburbs of Sydney, Wollongong or Central Coast over the past three [to] four years, you have just about won the property lotto, so a small correction will not have much of an impact on the overall outcome.”

Suburbs experiencing negative growth that Ms Porter labelled as “surprising” were units in Brookvale, declining by 9.8 per cent; George’s Hall, declining by 6.5 per cent; Turramurra, declining by 4.6 per cent; Olympic Park, declining by 2.7 per cent; and housing in Glenorie, declining by 8.3 per cent.

“These locations offer great transport, employment opportunities and amenities that most buyers are looking for,” Ms Porter said, “but with many of these pockets experiencing an oversupply of units, coupled with a cooling market, that is resulting in a downward trend in growth.

This is just the beginning and we expect to see other similar results filtering through in other oversupplied hubs in and around the inner west, eastern suburbs and Parramatta, in particular in the six to 12 months ahead.

Looking to the Hunter Valley and Lake Macquarie regions, housing in Kilaben Bay and Hamilton South reported negative growth of 3.7 per cent and 2 per cent, respectively, while units in Lambton, Metford, The Entrance North and Shortland also reported negative growth of 19 per cent, 16.1 per cent, 6.5 per cent and 5 per cent, respectively.

The Hunter Valley has been through a tough few years with the decline in mining activities over the past few years, lots of new house and land packages being supplied to the market in many of the Hunter regions, coupled with drought conditions throughout our regional locals which has put pressure on the local farming activities supporting that local economy and tourism market to a great extent, Ms Porter said.

These factors have been a mixing pot for disaster and has left the area with a significant underperformance factor, notably bucking the growth trend felt throughout much of the state for the past three [to] four years.

The feedback from many investors that have purchased in that market over the years is that they have properties in their portfolios that have sat stagnant for many years or even gone backwards.

Rural areas featuring low population figures returning negative price growth included:

Housing
• Peak Hill (-37.2 per cent)
• Coonamble (-14.5 per cent)
• Gilgandra (-12.1 per cent)
• Cobar (-11.1 per cent)
• Batlow (-7.2 per cent)
• Adelong (-5.9 per cent)
• West Tamworth (-5.9 per cent)
• Nana Glen (-5.4 per cent)

Units
• Narooma (-19.8 per cent)
• South Tamworth (-10.7 per cent)
• Evans Head (-8.9 per cent)
• Mudgee (-2.2 per cent)
• Queanbeyan West (-2.2 per cent)

‘Negative growth traps’ for PMs, BDMs to avoid
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