--- title: "Five Melbourne Suburbs I Would Never Buy In. The Data Is Ugly." description: "Data-backed analysis of 5 Melbourne suburbs with dangerous vacancy rates and oversupply. Werribee 3.6%, Clyde North 5.05%, Clyde 5.52%, Laverton 75 days on market, Kalkallo 8.9%." author: Yan Zhu date: 2023-01-19 category: Guides url: https://premiumrea.com.au/blog/melbourne-suburbs-to-avoid-vacancy-oversupply-data tags: ["suburbs to avoid", "vacancy rates", "oversupply", "Melbourne property", "Clyde North", "Werribee", "Kalkallo"] --- # Five Melbourne Suburbs I Would Never Buy In. The Data Is Ugly. *By Yan Zhu, Co-Founder & Chief Data Officer at PremiumRea — 2023-01-19* > Every buyers agent has a list of suburbs they love. Nobody talks about the suburbs they hate. Today I am talking about the suburbs I hate. With data. Every buyers agent has a list of suburbs they love. Nobody talks about the suburbs they hate. Today I am talking about the suburbs I hate. With data. I want to be clear about something. I am not saying these suburbs will never recover. I am not saying nobody should ever live there. I am saying that if you are an investor looking for capital growth and sustainable rental yield, these suburbs carry risks that the promotional material conveniently ignores. The common thread across all five is the same: oversupply. Too many new dwellings, not enough demand to absorb them. It is the single most reliable predictor of underperformance in the Australian property market, and it is hiding in plain sight if you know where to look [1]. ## Suburb 1: Werribee — 3.6 per cent vacancy, 243 building approvals Werribee sits in Melbourne's west, about 32 kilometres from the CBD. It has been a darling of the house-and-land package industry for years. Developers love it because land is cheap and council is accommodating. Vacancy rate: 3.6 per cent. For context, a healthy rental market has vacancy below 2 per cent. Between 2 and 3 per cent is manageable. Above 3 per cent means landlords are competing for tenants, which pushes rents down and extends void periods. Building approvals: 243 new dwellings approved in the most recent reporting period. That is 243 new properties about to hit the rental market in a suburb that already has more supply than demand can absorb [2]. The trap: Werribee looks affordable. The median house price is well below Melbourne's average. But affordability means nothing if your property sits vacant for eight weeks between tenants. Eight weeks of vacancy on a $450-per-week property costs you $3,600 in lost rent and $3,600 in mortgage payments you are making out of pocket. I have seen clients come to us after buying in Werribee. They bought off the plan from a developer who showed them glossy yield projections. The projections assumed zero vacancy and rent at the top of the range. Reality delivered four to six weeks of vacancy per year and rent $40 to $60 below the projection. The numbers collapsed. ## Suburb 2: Clyde North — 5.05 per cent vacancy, 1,676 building approvals Clyde North is the poster child for everything that can go wrong with growth-corridor investing. Vacancy rate: 5.05 per cent. That is catastrophic. One in twenty rental properties is sitting empty at any given time. In a suburb where the overwhelming majority of dwellings are new builds with mortgages attached, that means investors are bleeding cash every month [3]. Building approvals: 1,676. Let me say that again. One thousand six hundred and seventy-six new dwellings approved in a single reporting period. That is not a suburb. That is a construction site pretending to be a community. The infrastructure lag: new suburbs promise future amenities. Shopping centres, schools, train stations, parks. The promise sells the houses. But the amenities arrive five to ten years after the houses, and in the meantime, residents are driving 30 minutes to the nearest supermarket and sitting in traffic on single-lane roads designed for a fraction of the population now using them. Why investors get burned: Clyde North properties are sold at full retail by developers. There is no negotiation. There is no below-market acquisition. You pay exactly what the developer wants, and the moment you settle, you are competing with 1,676 other new properties for the same pool of tenants. Our firm operates on the opposite principle. We target established suburbs where supply is constrained, where new land releases are impossible because the suburb is already built out, and where owner-occupier demand creates a floor under prices. Clyde North fails every one of those tests [4]. ## Suburb 3: Clyde — 5.52 per cent vacancy, 445 building approvals Clyde sits adjacent to Clyde North and inherits the same structural problems. Vacancy rate: 5.52 per cent. Even worse than its neighbour. More than one in eighteen rental properties is vacant. Building approvals: 445. Lower than Clyde North in absolute terms but still dangerously high relative to the suburb's existing dwelling stock. The compounding effect: Clyde and Clyde North are not independent markets. They draw from the same tenant pool, the same buyer pool, and the same infrastructure network. When Clyde North adds 1,676 dwellings and Clyde adds 445, the combined impact on the local market is devastating. That is 2,121 new properties fighting for attention in an area where the road network, public transport, and commercial infrastructure were designed for a fraction of that density [5]. I have colleagues who have bought investment properties in Clyde. I asked one of them how it was going last month. His exact words: not great. ## Suburb 4: Laverton — 75 days on market Laverton sits in Melbourne's west, close to the Westgate Freeway. It is a mixed suburb with industrial pockets, some established housing, and new apartment developments near the train station. Days on market: 75. The Melbourne average is roughly 30 days. Laverton properties are sitting for two and a half times longer than the market average. That tells you demand is weak. When properties take 75 days to sell, vendors are forced to reduce prices. That creates a downward spiral: falling prices attract fewer buyers, which extends days on market further, which forces further price reductions. The Laverton trap is different from the growth-corridor trap. Laverton is not oversupplied with new builds. It is undersupplied with buyers. The industrial adjacency, the stigma of being a western suburb, and the lack of a clear gentrification narrative all contribute to weak demand [6]. As an investor, weak demand means two things: difficulty selling when you want to exit, and difficulty finding quality tenants willing to pay market rent. Both are portfolio killers. ## Suburb 5: Kalkallo — 8.9 per cent vacancy, 153 building approvals Kalkallo is in Melbourne's northern growth corridor. It barely existed as a suburb ten years ago. Vacancy rate: 8.9 per cent. Nearly one in ten rental properties is empty. I struggle to think of a worse number in metropolitan Melbourne. At 8.9 per cent, you are not investing. You are donating money to a mortgage lender. Building approvals: 153. Lower than Clyde North but on a much smaller base. Kalkallo has fewer total dwellings, so 153 new ones represent a proportionally enormous increase in supply. Days on market: 50. Well above the metro average. Kalkallo represents the extreme end of growth-corridor risk. The suburb is so new that there is no established community, no local economy, no organic demand driver. Every tenant is there because it is cheap. And when something cheaper appears further up the corridor, those tenants move on. I want to be direct about this. I believe growth-corridor house-and-land packages are one of the worst investment decisions available in Australian property. You are buying at retail, in a suburb with no supply constraints, competing against hundreds of identical products, with no negotiation leverage. The developer makes the margin. The investor takes the risk [7]. Every suburb on this list shares the same fundamental problem: more supply than demand. Our investment thesis at PremiumRea is built on the opposite principle. We buy in suburbs where land is scarce, where council will not approve 1,676 new dwellings because there is nowhere to build them, and where owner-occupiers outnumber investors three to one. That is how you build wealth. Not by racing to the cheapest suburb on the map. ## References 1. [CoreLogic, 'Australian Property Market Oversupply Indicators', 2020. Correlation between building approvals and price underperformance.](https://www.corelogic.com.au/research) 2. [ABS, 'Building Approvals', Cat. No. 8731.0, August 2020. Werribee LGA building approval data.](https://www.abs.gov.au/statistics/industry/building-and-construction/building-approvals-australia) 3. [SQM Research, 'Residential Vacancy Rates', August 2020. Clyde North vacancy rate 5.05%.](https://sqmresearch.com.au/graph_vacancy.php) 4. [PremiumRea investment framework. Supply-constrained suburb targeting vs growth-corridor exposure.](#) 5. [Victorian Planning Authority, 'Growth Corridor Plan', 2020. Casey-Cardinia corridor dwelling pipeline data.](https://vpa.vic.gov.au/) 6. [REIV, 'Days on Market by Suburb', Q2 2020. Laverton: 75 days vs Melbourne average 30 days.](https://reiv.com.au/property-data) 7. [Property Investment Professionals of Australia (PIPA), 'Investor Sentiment Survey', 2020. Growth-corridor risk assessment.](https://www.pipa.asn.au/) 8. [Domain, 'Rental Vacancy Rates', August 2020. Kalkallo vacancy rate 8.9%.](https://www.domain.com.au/research/rental-report/) --- Source: https://premiumrea.com.au/blog/melbourne-suburbs-to-avoid-vacancy-oversupply-data Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent