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The riskiest type of Aussie property investment revealed

Lucy Dean
Images: Getty
Images: Getty

The declining Aussie property market poses a risk for anyone with investment in the segment – but alarm bells should be ringing for one investment type in particular.

Owners of off-the-plan apartments top the list of the type property investment most likely to suffer potential disaster.

That’s thanks to a cocktail of an oversupply of apartments, rising settlement default rates and potential changes to negative gearing.

Also read: These two charts show you whether your property is growing or falling in value

“The first, and most obvious, is the risk of oversupply which is something we’ve seen in inner-city Brisbane which has created weakness in the market leading to lower valuations, rising defaults on settlements, major discounting, falling rents and ridiculous incentives to get buyers across the line,” RiskWise CEO Doron Peleg said.

The oversupply issue had even led to banks compiling blacklists of postcodes suffering a potential oversupply of apartments.

Also read: The apartment projects blacklisted by a major Aussie bank

The worst off-the-plan suburbs in 2018

Off-the-plan projects in these suburbs are the most likely to be scrutinised by lenders, meaning you’ll often have to front a higher deposit or even risk having an application turned down altogether.

Image: RiskWise
Image: RiskWise

RiskWise said this list isn’t surprising given more than 5,300 units were completed in Brisbane in 2017 with another 11,000 under construction.

Zetland is also full of high-density units with another 5,000 in the pipeline.

Capital gains tax adds yet more risk

Investors should also be aware of the effect touted changes to capital gains tax and negative gearing will have on their property.

Also read: The property market shift which puts the power back in buyers’ hands

The policies are a major part of Labor’s election platform and could mean big problems for investors, Peleg said.

“If you buy an off-the-plan unit, and there are no changes to negative gearing, when you sell the property the new investor will have the same tax benefits of depreciation as the original owner,” he said.

“However, if the changes go ahead, the new purchaser will not be able to claim negative gearing against their wages and the capital gains tax discount will be cut in half,” he continued.

This means the seller may need to lower the value of the property because the property is less appealing to a buyer.

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