In this blog post, we present a structured analysis to help you identify suburbs to avoid, based on four key indicators. We begin by outlining the key features that act as warning signs in potential investment locations. From examining crime rates and economic growth limitations to assessing infrastructure and amenities, we provide a comprehensive checklist to safeguard your investments. We then delve into specific suburbs in Adelaide that exhibit these concerning features, backed by data and market trends.
What features should investors look for in suburbs to avoid?
In addition to analysing the determinants of supply and demand when considering potential suburbs to invest, investors should place close attention to:
1. High vacancy rates
High vacancy rates in a suburb serve as a clear warning sign for property investors, indicating that the area may be a poor investment target. When a suburb has a significant number of vacant properties, it suggests an oversupply of housing relative to the demand. This oversupply can result from various factors such as limited job opportunities, population decline, or an imbalance between new housing developments and population growth. High vacancy rates often lead to lower rental incomes, as landlords may struggle to find reliable tenants or may need to lower rents to attract occupants. Additionally, the presence of numerous vacant properties can lead to decreased property values as the supply outweighs the demand, further diminishing the potential for capital appreciation. Ultimately, investing in a suburb with high vacancy rates can present challenges in generating rental income and achieving long-term profitability, making it an unfavorable choice for property investors.
2. Poor infrastructure
Poor infrastructure in a suburb is a significant indicator that the area may not be an ideal suburb for property investors. Inadequate infrastructure, such as poorly maintained roads, limited public transportation options, inadequate schools, healthcare facilities, and recreational amenities, can greatly impact the desirability of a suburb. Prospective tenants or buyers often prioritise convenience, accessibility, and quality of life when considering a property. If a suburb lacks essential infrastructure, it can deter potential residents, leading to decreased demand for rental properties and a limited pool of potential buyers. Moreover, poor infrastructure can hinder the long-term growth and development of a suburb, limiting its potential for property value appreciation. Investing in a suburb with insufficient infrastructure may result in longer vacancy periods, reduced rental income, and challenges in attracting quality tenants or buyers, ultimately making it a poor investment choice.
3. Limited amenities and services
Limited amenities and services in a suburb can be a strong sign that the area is a poor investment target for property investors. Essential amenities such as grocery stores, shopping centers, entertainment venues, quality schools, healthcare facilities, and recreational spaces play a crucial role in attracting tenants and buyers. A lack of these amenities can lead to reduced demand for properties and hinder the potential for rental income or property value appreciation. Prospective residents seek convenience and a high quality of life, and the absence of necessary amenities may deter them from choosing a particular suburb. Without access to desirable amenities and services, the overall appeal and marketability of properties within the suburb can be significantly diminished. Therefore, investing in a suburb with limited amenities and services may pose challenges in finding tenants or buyers and ultimately result in lower returns on investment.
4. Supply risks
The presence of factors indicating oversupply is another thing that investors need to be aware of. When there is an excessive number of properties available for rent or sale within a given area, it creates a situation of oversupply in the market. This oversupply can arise due to factors such as rapid construction of new developments or a decline in demand for housing. An oversupplied market can lead to increased competition among property owners, resulting in downward pressure on rental prices and property values. Additionally, a surplus of available properties can lead to longer vacancy periods and difficulties in finding suitable tenants or buyers. Investors may struggle to achieve desirable rental yields or significant capital appreciation in a market where the supply outweighs the demand. Therefore, investing in a suburb with risks of oversupply may present challenges in achieving profitable returns and should be carefully evaluated before making an investment decision.
Which 5 Adelaide suburbs possess some of these features?
In the table below we list the 5 suburbs that possess these features. We are recommending investors steer clear of these suburbs, particularly those with risk of increased supply in the coming years.
Suburb | High vacancy rate | Poor infra | Limited amenities | Supply risk |
Lonsdale | ✖ | ✓ | ✓ | ✖ |
Lightsview | ✖ | ✓ | ✓ | ✓ |
Panorama | ✓ | ✓ | ✓ | ✖ |
St Clair | ✖ | ✓ | ✓ | ✓ |
Bowden | ✖ | ✓ | ✓ | ✓ |
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