New research from RiskWise Property Review has identified the best and worst off-the-plan (OTP) suburbs for investment. The research also revealed that OTP houses are usually a better investment than new units.
The research into OTP properties was conducted to measure success and failure factors, as well as identify the best and worst investment areas in Australia. The research concluded that buying an OTP unit remains a risky proposition in every capital, and that most property buyers should probably opt for a house instead.
“Currently, more than 300,000 units are in the pipeline and are planned to be completed in the next two years,” said Doron Peleg, CEO and founder of RiskWise Property Review. “Some areas with a significant supply of OTP properties have been flagged by the RBA as high risk investments, and also major lenders have set lending restrictions and created ‘blacklists’ for some areas. Overall, the vast majority of current OTP properties are in high risk areas.”
While OTP units remain the riskier of the two dwelling types, Peleg said both houses and units carry a certain amount of risk. They also usually deliver a lower return than established properties.
“In addition to the typical risks associated with an existing property, an OTP property is also exposed to a settlement risk and to a significant sudden addition of new dwellings, mainly investment properties, into the area,” he said.
Best and worst suburbs revealed
Twenty-five suburbs in Sydney, 20 in Greater Melbourne, and 15 in Greater Brisbane have been identified as the best suburbs for OTP investment. The research also found that investing in OTP houses was the least risky in 45 of the 60 assessed suburbs.
“In Sydney, we identified 19 (of 25) suburbs where OTP units have the potential to deliver solid capital growth, and in Melbourne we identified 10 (of 20) suburbs that have met our criteria,” Peleg said. “However, in Brisbane, while there were a small number of suburbs where OTP units have the potential to deliver solid capital growth, the risk associated with these investments is beyond the required threshold, and in all of the 15 suburbs in Greater Brisbane, only houses are included in our report.”
New houses in Kellyville in New South Wales, North Geelong in Victoria, and Manly West in Queensland, were identified as some of the best off-the-plan suburbs in Australia. Additionally, new units in prime areas in the North Shore of Sydney were identified as the best OTP investments.
In contrast, OTP units in Waterloo in New South Wales, Melbourne in Victoria, and Fortitude Valley in Queensland, were among those classified as having the highest risks.
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