Five Melbourne Suburbs Where Property Investment Is Not a Gamble. It Is a Loss

Property investment should never feel like punting on the pokies. It should be a strategy based on supply, demand, land scarcity, and real long term fundamentals. Yet there are a handful of suburbs in Melbourne where the numbers speak for themselves. These are not areas where you might lose. These are areas where the odds of losing money are almost certain because the underlying conditions that drive capital growth are simply not there.

Drawing on the same themes covered in your original article on the ten suburbs to avoid, here are the five suburbs where an investor can almost guarantee a poor outcome. These suburbs consistently show weak growth, a high oversupply of identical units, huge vacancy rates, and very little land value. In short, they lack the scarcity that drives property prices over time.

Below are the areas where you are not investing. You are donating.

1. Southbank

Southbank has become the textbook case of oversupply. Dozens of high rise towers have flooded the market with near identical apartments for almost twenty years. When supply grows faster than population and income growth you do not get price rises. You get stagnation.

Southbank has extremely low land content, heavy reliance on international students, and some of the highest owners corporation fees in Victoria. Any short term price increases tend to coincide with temporary spikes in overseas migration rather than genuine demand from owner occupiers. It is almost impossible to find a resale that performs well over ten years.

2. Docklands

Docklands is the suburb every property economist uses as an example of how not to invest. The area was built on the promise of master planned living and high growth through infrastructure. Instead it has delivered some of the weakest capital growth in the country for more than a decade.

The problem is simple. Too many towers, too many identical two bedroom units, and a buyer market dominated by investors rather than families. When the majority of stock is bought by investors, you get rental competition, discounted lease offers, and very slow appreciation. Docklands apartments almost always resell for the same price people paid many years earlier, sometimes less.

3. Melbourne CBD

The city should be a premium location. It has employment, universities, transport, and retail. But it suffers from exactly the same issue as Southbank and Docklands. Too many apartments and nowhere near enough scarcity.

The CBD is one of the most oversupplied apartment markets in the country. Large parts of the stock are built for the international student market, not long term owner occupiers. Most apartments have minimal land value and are located in older buildings where maintenance costs are rising. Capital growth across twenty years has been almost flat compared to detached homes in the suburbs.

4. Carlton

Carlton has two very different markets. Traditional Victorian homes and terraces that perform extremely well, and the apartment market which performs extremely poorly. This article refers only to the apartment sector.

Carlton apartments have suffered the same fate as the CBD. Massive construction during the international student boom created a huge pool of small one bedroom units in large towers. Many of these buildings suffer from high turnover, poor natural light, and significant owners corporation fees. Long term price growth is soft because buyers have too many alternatives nearby.

5. West Footscray (large apartment complexes)

Again, we are not talking about houses which still do well. The issue here is with the large scale apartment developments built in the past fifteen years. Many were marketed as affordable entry points close to the city, but the fundamental problem remains. Too many units built at once, too little land content, and a market that does not value high density living in the western suburbs.

While the inner west has seen strong demand for family homes, the apartment sector has lagged heavily. Investors who bought off the plan in these projects often find that resale values have gone backwards or stayed flat while house prices around them surged.

Why These Five Always Lose

The common theme is oversupply. Every one of these suburbs has a large volume of apartments that compete on price rather than value. Investors buying in these areas are not buying land. They are buying airspace in towers that can be duplicated across the next street and the next block at any time.

The old rule of supply and demand still rings true. When there is an unlimited supply of a product, the value of that product does not rise. It is really that simple.

If you want growth, buy something with land content. Buy something with scarcity that cannot be cloned next door.

Before You Invest, Get the Contract Reviewed Properly

Good research helps, but it does not replace proper advice before you sign. If you are thinking of buying in any area, let us check the contract and the Section thirty two before you commit. We can walk you through the risks, the owners corporation issues, the outgoings, the building history, and the parts of the contract that most buyers never notice until it is too late.

Visit
https://www.victorianpropertysettlements.com.au/contract-review-request
and send the contract through for review.