Danger! NSW investment spots to avoid

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If the only lemons you intend buying are at a grocery store, take heed as we reveal the state suburbs that are currently performing the worst on a number of indicators and which may, arguably, perform badly for some time to come.

If you’re considering investing in a regional NSW town with a good connection to the tourism industry and a healthy family component, you might want to narrow down your options.

A ranking of the worst performing NSW suburbs by DSRscore reveals that several pockets of poor-performing suburbs exist in the state’s south and far north, on the stretch of coastline between Byron Bay and Tweed Heads.

These areas may not have had the largest price falls within the last 12 months compared to many other suburbs, but according to DSRscore indicators they may suffer a lot more in the months ahead.

The DSRscore takes into account the level of demand in an area measured by auction clearance rates, days on market, vacancies, yield and number of properties on sale. Properties with a good DSRscore indicate markets where high demand is matched with low supply.

Many of the markets with the lowest DSR scores in the state are around Jindabyne – with suburbs Jindabyne, East Jindabyne and Kalkite showing significantly low scores. Kalkite has the lowest DSR score in the state, with just four points out of a possible 48.  

These suburbs all suffer from high vacancy rates, upwards of 9%, which Ben Clancy of Raine & Horne Jindabyne explains may only be a temporary situation. “The rates can probably be explained somewhat by the seasonal popularity around this time of year for snow-workers and holiday-goers,” he says.

These areas also typically require a high number of days on the market to sell. In the case of Kalkite, properties are being listed an average 476 days before selling. This is against a national benchmark of 92 days.

That capital growth prospects have not been the best in this region is also evidenced by recent price growth data. According to RP Data figures Jindabyne prices fell by -22% in the three months to January, with 12 month figures at -14%.

On NSW’s north coast, Casuarina and New Brighton currently suffer from low yields of 3.23% and 3.20%, respectively. This is despite relatively affordable median prices that hover around the $500,000 mark. In the case of New Brighton, low rental yields are being compounded by the excessive amount of properties that are on sale in the area – currently at over 6% of the total properties in the suburb. 

Locality  Value  Days on market Auction Clearance Rate (ACR)  Vacancy Yield Stock on market as % of all props.
KALKITE  $357,000 476 44.40% 9.56% 3.20% 4.81%
NEW BRIGHTON  $555,000 233 25.00% 2.87% 3.20% 6.55%
HILLSIDE  $405,500 203 4.20% 5.02% 4.23%  
EDEN (U)  $212,000 237 33.30% 0.00%               n/a 5.86%
RHODES (U)  $582,250 170 32.60% 12.59% 5.29% 6.11%
BURRADOO  $963,500 204 35.70% 3.03% 3.29% 8.98%
HAWKS NEST  $391,500 459 25.00% 1.01% 3.37% 6.82%
JINDABYNE  $330,000 476 50.00% 9.55% 6.94% 5.55%
CASUARINA (U)  $458,750 213 33.30% 1.34% 3.23% 5.14%
WOOLI  $233,500 157 24.40% 6.34% 5.77% 9.93%
CABARITA BEACH  $420,000 196 21.40% 2.35% 4.11%  
EAST JINDABYNE  $461,000 476 44.40% 9.49% 5.59% 3.65%
MINNIE WATER  $590,000 157 24.40% 5.67% 2.82% 3.24%

 Source DSRscore.com.au

The Demand to Supply ratio

Whittling down your options for a lucrative investment property from among the 15,000+ suburbs around Australia can be a daunting prospect. The Demand-to-Supply Ratio (DSR) is a careful examination of eight major property statistics all combined into a single relative figure to help gauge the demand-to-supply ratio for a suburb.

According to Jeremy Sheppard of Redwerks Research: “It is an accurate measure of the gap between supply and demand”.

Sheppard believes that the DSR is crucial when shortlisting, the first of his four steps towards selecting a prosperous investment property. This involves:

(1) filtering the thousands of suburbs across a state or the nation down to a few dozen with the most potential for growth, before

(2) performing fundamental detailed research to narrow your options down further, then finally

(3) identifying the best streets within these suburbs and

(4) the best properties on these streets.

The DSR can be a useful marker for potential growth, however, it should never be blindly relied upon without further detailed research. Nevertheless, the DSR serves a useful converse purpose in flagging areas with very little prospect for returns, signalled by poor results in many or all of its eight major criteria.

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