The Four Worst Places to Invest in South-East Queensland
You’ve heard all of the hype.
‘Invest in South-East Queensland’s fastest growing area’
‘Strategically located between two growth hubs’
‘Invest in South-East Queensland’s newest CBD’
‘Get in early before prices go up!’
The problem is, most of it is nonsense.
As South-East Queensland grows in population, new areas need to be developed and density in existing areas increased. This is important to meet the future housing needs of the region, and to prevent property prices from growing unsustainably.
It doesn’t mean that you should invest in these areas, however. In fact, many of these new development areas have the least chance of producing a strong return on investment. Growth in property prices and rents is driven by one equation: demand vs supply. If there’s too much supply, you’re not going to get capital growth or rental increases, because you’ll be constantly competing against large amounts of new stock. The ‘growth’ that is used the sell the area to you will be the reason your investment under-performs.
Moreover, the worst-offending area have poor demand drivers. New housing developments are being created far away from employment sources and lack decent transport infrastructure. Meanwhile, established areas are having their amenity ruined by hulking apartment complexes packed in like sardines.
To make money out of property investment, you need to open your eyes beyond the sales pitch you’re receiving, and look at the true situation within an area. With this in mind, I’ve singled out my top four worst areas to invest in South-East Queensland - two areas for houses and two areas for apartments.
It goes without saying that if you shouldn’t buy houses in the first two areas, you definitely shouldn’t be buying townhouses or units there either! In fact, I’d avoid apartments anywhere in SE-QLD other than a few selected areas.
Now here’s the list…
HOUSES
Ripley Valley, Ipswich
Ipswich is ground zero for new housing supply in South-East Queensland, with over 80,000 new homes to be built there over the next 25 years. The Ripley Valley will receive the lion’s share of this - 50,000 dwellings are projected to be built in the valley alone.
Demand drivers are also weak, with only 62,000 new jobs forecast in Ipswich over the next 25 years, despite an increase in population of 320,000. Ripley may eventually get a new train line and some upgraded motorways, but it’s a long commute, and this kind of infrastructure has done nothing to boost prices in Springfield Lakes nearby.
The stats are already nasty with vacancy rates persistently hovering around 4% and current stock on market at a whopping 16%! Rents have only increased in the area by $20 per week over the last decade.
The reality is, there will never be an undersupply of dwellings in the Ripley Valley. And that, unfortunately, rules out strong, long-term capital growth.
Why does Population Growth not equal Capital Growth?
Yarrabilba, Logan
The reason behind this development continues to baffle me. It’s an hour’s drive from major employment centres on both Brisbane and the Gold Coast, and the nearest major centre is Jimboomba, with a population of only 13,000. It has no major transport links, and is a 20 minute drive to the M1. There’s 20,000 new dwellings slated to be built here in the next 20-30 years, so there’s no scarcity in future supply. Indeed, Yarrabilba is surrounded by other developments within the Greater Flagstone Development Area, including Park Ridge and North and South Maclean, which will see a total of 50,000 new dwellings. It’s great news for affordable housing, but hardly great news for capital growth.
Yarrabilba is convenient to neither Brisbane nor the Gold Coast, and the wider area will house 50,000 new dwellings in the next 25 years.
apartments
Southport, Gold Coast
Touted as the Gold Coast’s CBD, Southport is a reasonable market for houses and townhouses, but is an utter disaster for units. This is thanks to its designation as a Priority Development Area, which has seen developers unleash with a wave of new apartment construction. This has doubled the total number of apartments in the suburb and they’re not stopping there; expect another 10,000 apartments to be built here in the next 25 years.
This has hammered the median price for units, which has declined over the past 10 years This is despite the construction of new apartments, which should have increased the median price (athough not the actual value of existing apartments).
Median unit price - southport
It’s not going to get better. Don’t be fooled by the light rail, the new Gold Coast hospital or the promises of a bustling city centre - stay away from apartments here, unless you want poor capital growth and rising body corporate fees. While the Gold Coast has a good track record of creating jobs, it isn’t creating the types of high-paying inner-city jobs that sustain high-density developments in global cities like Sydney, Melbourne, Singapore or Hong Kong.
Apartments in Southport are continuously oversupplied due to its designation as a Priority Development Area.
Chermside, Brisbane
There are many suburbs in Brisbane with an oversupply of units, but there are none with quite the same issues as Chermside. Built around the Chermside Westfield shopping mall and Prince Charles Hospital, these are the only major attractions of the suburb. Chermside is ten kilometres from the CBD, and there’s no train line, busway, or even a good road into the city (Gympie Road is a nightmare). While the suburb has reasonable appeal in quieter, lower-density areas away from the Westfield, the areas where apartments are being constructed have had their amenity shattered by overly-large, generic apartment buildings and the continued noise and dust of development. So unless you really like shopping, there’s not a lot to recommend the area.
Despite this, Brisbane City Council is allowing a further 7,000 new apartments to be built here over the next 25 years. This is an insane number given the lack of demand drivers in the suburb. To give context, it is 12 times the number that is forecast for New Farm; a suburb next door to the CBD and with vastly greater amenity.
Relaxed zoning in Chermside has seen a glut of medium-rise apartments constructed - far more than required given the demand drivers of the suburb. This is only going to get worse in the future.
Unfortunately, this is only a small list of the places I would steer clear from.
If you’ve been recommended property in one of the locations, or another area of South-East Queensland that you’re unsure about, book in a free consultation with me to get an honest assessment of the location’s investment potential.
