Suburbs to Avoid - Pimpama

Oversupply - a reality in Pimpama that is only getting worse.

Oversupply - a reality in Pimpama that is only getting worse.

Pimpama is a suburb on the northern Gold Coast, located 30 kms from Surfers Paradise and 48 kms from Brisbane, in the much-touted Brisbane-Gold Coast ‘growth corridor’. A favourite of many property investment companies, I’d steer well clear of Pimpama for the following reasons:

Vacancy Rate – Pimpama’s vacancy rate is currently 3.63%. A quick check on realestate.com.au confirms this figure: there are currently 197 properties listed for rent in the suburb. A vacancy rate of 3% is considered to be a balanced rental market, so this figure does not bode well for you getting a tenant for your investment. It is very likely to lead to falling rents as landlords discount to attract tenants.

How does Pimpama compare against established suburbs on the Gold Coast? Click here to find out.

How does Pimpama compare against established suburbs on the Gold Coast? Click here to find out.

Owner-Occupier Ratio – Only 44% of property in Pimpama is owned by people who have chosen to live in the suburb, with a majority of property owned by investors. This is not surprising given that the suburb is heavily marketed by investment companies (who coincidentally earn substantial commissions from selling property there). It shows that owner-occupier demand is soft in the suburb. This is backed up by data showing online search interest for the suburb, which is one quarter of that of an established Gold Coast suburb such as Ashmore. Owner-occupier demand is the most reliable indicator of true demand for a suburb, as people don’t commit to spending hundreds of thousands of dollars to live somewhere they don’t like. Investors, on the other hand, often don’t give such consideration to purchasing decisions.

Building Approvals - There are currently 1,049 properties in Pimpama. 312 of them are currently for sale. Sales in the suburb are running at around 200 properties per year. In the last 12 months a further 1,334 properties have been approved for construction. You don’t need a Nobel prize in mathematics to see that Pimpama is in for some serious oversupply. Which doesn’t do a lot for the capital growth of your investment.

In summary, there are some serious warning signs in Pimpama for investors. There is a very significant oversupply looming in the suburb, and for me the only way to increase demand sufficiently to clear the backlog will be discounting – both in rents and asset prices. Neither is a particularly palatable outcome for investors looking for strong rental yields and capital growth.