Property management firm LongView has identified the worst suburbs for property investors across major Australian cities, highlighting regions where investment returns have stagnated or failed to meet expectations.
Key Findings
LongView’s research reveals that popular metropolitan suburbs in Brisbane, Sydney, and Melbourne are now seeing poor or flat capital growth. Despite being desirable locations, these areas have failed to provide the returns that many investors hoped for, with low capital appreciation being a significant concern.
Melbourne’s Struggles
Melbourne’s property market has seen some of the weakest capital growth in the country. The worst-performing suburb was Essendon North, which experienced a significant drop in investment property values—down 0.56% in 2024. Other underperforming suburbs in Melbourne include:
- Abbotsford: 0% growth
- Travancore: 0.11% growth
- West Melbourne: 0.54% growth
- Maribyrnong: 0.56% growth
- South Yarra: 0.59% growth
- South Melbourne: 0.74% growth
- St Kilda: 0.91% growth
- Collingwood: 1.11% growth
- Docklands: 1.2% growth
None of Melbourne’s worst performers saw more than a 1.2% increase in capital growth, indicating that investors in these areas likely faced stagnation in the value of their properties.
Sydney’s Low Growth Zones
Sydney, while not as dramatically affected as Melbourne, still saw areas with disappointing returns for property investors. The worst-performing suburbs included:
- Rosehill: 0.21% growth
- Mortlake: 0.72% growth
- Asquith: 1.18% growth
- Parramatta: 1.57% growth
- Chippendale: 1.68% growth
- Harris Park: 1.69% growth
- Westmead: 1.74% growth
- Wentworth Point: 1.75% growth
- Warwick Farm: 1.75% growth
None of these suburbs experienced more than a 1.75% rise in capital values, suggesting that the Sydney market is facing similar stagnation in certain zones.
Brisbane’s Struggles with Inner-City Units
Brisbane, while showing overall better performance compared to Melbourne and Sydney, still had its fair share of underperforming suburbs. Investment properties in the inner-city and surrounding areas have also struggled to see meaningful capital growth:
- Fortitude Valley: 1.55% growth
- Brisbane City: 2.19% growth
- South Brisbane: 2.26% growth
- Bowen Hills: 2.43% growth
- Woolloongabba: 2.93% growth
While these suburbs experienced positive growth, they were still far below the robust capital growth seen in other parts of the city, suggesting that inner-city units are facing significant challenges.
The Underlying Issue: Apartments vs. Houses
According to LongView’s co-founder, Evan Thornley, a key factor behind the poor performance of these suburbs is the higher concentration of investment properties in apartments and units. The firm’s analysis found that nearly 80% of sales of investment properties in 2024 were apartments or units, which typically appreciate at a slower rate compared to land. This highlights LongView’s guiding principle: land appreciates, buildings depreciate.
Thornley stresses that the best investment properties are those where most of the value is held in the land itself, rather than the structure on it. He points to older, well-located homes on substantial land as the best bet for capital growth. These properties, which he refers to as RODWELLs (robust older dwellings on well-located land), make up a small portion of Australia’s property market but account for a large share of its capital growth.
Looking Ahead: Co-Investment Opportunities
As stagnation continues in certain metropolitan areas, Thornley believes there will be a shift in investor strategy, with a growing interest in co-investment schemes, such as LongView’s Shared Equity Fund, to access higher-performing properties. These funds allow investors to pool their resources and target properties with average capital returns of around 7%.
Conclusion
LongView’s findings underscore the importance of carefully evaluating investment properties, particularly in the face of stagnating growth. While some suburbs in Melbourne, Sydney, and Brisbane may still seem attractive, investors must consider the underlying value of the land, not just the structure, when selecting properties. The analysis serves as a reminder that not all investment areas are created equal, and that focusing on land-based assets could provide better long-term returns.
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