How to find the right property investment
16/05/2018 David Conner, Head of Property (NSW)
There are a myriad of reasons people choose to invest in property and most have a specific criteria they wish to satisfy.
It may be because someone said you should, or you’ve decided it’s the best way to diversify your portfolio, reduce tax, create wealth, subsidise your superannuation or set up your children’s future. Or maybe it’s one of many other potential reasons.
Whatever your reason to invest in the Australian property market, you’ve probably asked the same question:
“With so many options available, which option is right for me?”
Let’s assume you’re a first timer looking to invest in a residential property (the safest option if you’re new to property investment).
There are key factors you need to consider when investing in property. These include, but are certainly not limited to:
• vacancy rates
• proximity to services and employment hubs
Once clear on these basics, you then need to decide where to invest.
Choosing where to invest
Choosing where to invest in property can seem a daunting, confusing and difficult task to do on your own. Luckily you don’t have to; with the help of an industry expert you’ll be able to invest with ease and work toward achieving your long term financial strategy.
A diversified portfolio is a good portfolio, and this rings especially true with property. If you live in Sydney it would be wise to invest in Brisbane or Melbourne, and vice versa.
I often tell my clients that we’re incredibly lucky in Australia to have three eastern seaboard capital cities that are all very different. They each look and feel unique, because they fundamentally are – so which capital is the best to invest in?
Without being too biased, here are some important characteristics in each city to think about.
Sydney has undergone an unparalleled period of growth over recent years.
If you bought a property in Double Bay in 2012, you’d have doubled your money today. That’s right; Double Bay experienced 98% growth over the last five years!
There are plenty of other examples of this happening in Sydney, but this doesn’t mean that it’s a great place to invest right now.
I do not see any value there at the moment; it’s likely the city will see very moderate to zero levels of growth in the next few years.
However, this will change and we will revisit when evidence of this change becomes apparent… but for now I’m staying away from recommending Sydney as an option for my clients.
Brisbane has had a strong and stable property market in recent years and that means there’s a lot to be excited about.
Large infrastructure projects are currently underway (second parallel runway, Queens Wharf precinct, Kuripla Precinct, Springfield tech hub, to name just a few) and they will change the Brisbane’s landscape in the years ahead. The city has even been named Australia’s lifestyle capital, with seven of its suburbs making REA’s list of Australia’s top ten most liveable suburbs.
This city is becoming more sophisticated, as food and service perform well, and is set to transform further in the next five to ten years. This transformation will reflect favourably on property values and I believe that clients that choose to invest in (the right areas) of Brisbane’s market will enjoy strong gains over time with secured rental income.
The Melbourne market has long been considered a stable and solid area for investing in property. It mirrors Sydney in terms of growth and performance but offers better value per square metre than its northern cousin.
Melbourne flourishes when it comes to food and service, and has a strong rental market of professionals who gravitate towards high quality housing on CBD fringe locations.
Long referred to as Australia’s most liveable city (until REA passed the torch to Brisbane - sorry Melburnians), and more recently the world’s, I strongly believe in the Melbourne property market for investment and will continue to support it off the back of its underlying fundamentals.
Why only eastern seaboard?
You might notice that I’ve only mention eastern seaboard capital cities. This is due to the fact that they are the only capital cities in Australia that we, at The Hopkins Group, consider to be major metropolises.
A major metropolis is determined by population growth, international and interstate migration, and the ability to stand strong should there be a correction in more than one industry.
For example, unlike Perth, Sydney, Brisbane and Melbourne will not be adversely affected by a drop in the price of iron ore. Nor will they experience a drop in property values, employment or income levels, should tourism numbers decline – a situation that would most certainly affect Surfers Paradise and the Gold Coast’s property market.
I tend to stick to what we call “inner urban areas of a major metropolis”. Essentially, this means the fringe locations (usually within 10 kilometres) of a major, independent CBD.
Our due diligence checklist and market research procedures have remained the same for 40 years because they work. We stick to proven fundamentals in an attempt to de-risk the process as much as possible for our valued clients.
Need more help in finding a property that’s right for you? Our team are on hand to answer any questions you might have. Contact a property investment adviser today.
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