Which property locations are most at risk in the short term?

In these unprecedented times, if there is one certainty that we can hold on to, it is that growth will return to our property markets.

As the restrictions on movement and travel are eased, some areas will experience greater demand for accommodation than others, and they hold the key to finding post COVID boom towns.

Which areas are most at risk right now?

Some property markets are at high risk of price falls occurring, and before we can look at the boom potential locations, we should take note of areas that investors need to avoid right now.

They are suburbs where accommodation demand has been largely dependent on short-stay business and holiday rentals, international students, tourists and workers in the hospitality industries.

Rental demand has collapsed in these locations as demonstrated by these examples:

Which property locations are most at risk in the short term?

The impact of COVID-9 on rental demand in these areas is clear, with advertised rental vacancies nearly doubling in Brisbane CBD, more than doubling in Melbourne CBD, Docklands and Sydney CBD and trebling in Southbank since the crisis started three months ago.

Around half of the investors in these suburbs and others like them in similar high density inner urban precincts are currently hanging on to empty apartments, for which they must continue to pay holding costs without any rental income.

The prospect of price falls in such locations is almost certain, and they could be significant as desperate owners try to offload their properties no matter what, before they become mortgagee in possession nightmares.

However, selling now would be the worst possible outcome for property investors in such areas, as these same areas will bounce back quickly and strongly once travel restrictions are eased and rental demand returns.

Where will the best opportunities lie?

In fact, the areas worst hit by the collapse in short term business and holiday rentals, tourism and overseas migration will be the first to bounce back as the current restrictions are lifted. Desirable Location 300x200

Recovery will closely follow the progressive ending of the current restrictions on movement and travel.

When freedom of movement is once again permitted in Australia, we can expect a huge revival in property markets reliant on rental demand from day-trippers, holidaymakers, business trips and students.

In addition to inner-urban precincts such as the Sydney, Melbourne and Brisbane CBDs and their surrounding high-density suburbs, growth will return to popular holiday destinations such as those shown in this table:

Which property locations are most at risk in the short term?

In the longer term, our full economic recovery will require an opening of international borders as we experience a huge rise in tourism, international students, and migrant arrivals from Europe, Asia, and Africa of people seeking the security, safety, and opportunities that Australia offers.

After every major international crisis, war, or other catastrophes, Australia prospered and our property markets boomed when our borders were opened.

There is no reason to believe that the same won’t occur when this crisis is behind us.

NOW READ:

The coronavirus means nobody is searching for houses

Coronavirus crisis: I have no idea what will happen to property prices!

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John Lindeman

About

John Lindeman has well over a decade of experience researching the nature and dynamics of various types of assets at major data analysts and is a leading property market researcher, author and commentator. For more information visit Lindeman Reports.


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