Australia’s property market might be hot right now, but that doesn’t mean every property for sale is a good investment.
Multi award-winning buyer’s agent Miriam Sandkuhler of Property Mavens says buyers still need to be very careful about doing the right research to choose locations carefully and due diligence before buying.
Unfortunately, she says, a lot of desperate people are buying poor-quality properties.
“It’s always like this in a seller’s market,” says Sandkuhler guest presenter on a recent webinar hosted by Hotspotting.
“Rubbish stock hits the market and people unwittingly buy it,” she says. “We get people who are so exhausted and over the buying process, they get to the point where they’ll pay anything to end their pain.”
Sandkuhler says although prices are increasing in regional markets at the moment, that doesn’t mean all of them are good locations for long-term investment.
“We’re seeing a lot of first-time buyers who are priced out of major cities, going to regional centres because they can afford to buy a house there,” she says.
“People are fleeing the city and they get really good bang for their buck in the regional areas but they must be careful about what they buy.”
Sandkuhler says there are many factors to take into consideration, including days on market.
“The longer a property sits on market, the less appeal that it has – and the more likely that it’s going to struggle to sell over the long term. It’s usually an indication there’s something wrong with the property or another reason why it’s not selling.”
Previous price growth in the region is also important to consider, not just in the short-term during the current boom period, but over the past 5-10 years.
Future land supply is another indicator of whether an area is good for investment, as are employment opportunities and proposed infrastructure.
Too much land available means there will be more subdivisions and potentially future oversupply, which will dampen capital growth in the future.
“You absolutely want to know what the level of employment or unemployment is in the area you’re buying in, because that can go to the calibre of tenant that you might attract,” Sandkuhler says.
“All of that information will paint a picture, firstly, about the area in which you want to buy in and then you need to drill down further.”
Investors needed to weigh up the macro-economics of an area: supply and demand driven by population growth, land availability, housing starts, mineral exploration, tourism issues, infrastructure development by state and federal government, and business investment in infrastructure.
Micro-economic factors are also important including sustainable future growth as a result of population growth and migration, plus amenities such as public transport, hospitals, schools, employment and public transport.
“When I work with investors, I never buy into a regional centre that has a population less than 80,000 because you won’t find all that infrastructure in smaller towns,” she says.
Sandkuhler says investors, when buying in regional areas or small towns, need to be careful about paying too much over the current median house price.
“The median is indicating where the mid price point of property sit and properties under the median tend to be a little bit easier to resell. Once you significantly get over that median price point, you might have some challenges.”
She urges investors to do their research particularly if looking at large lifestyle blocks which can come with a lot of hidden costs.
“Is there sewage connected? Is there gas connected? What’s the power source? What about water? Are there dams? Is there adequate fencing? What are the outbuildings and most of all, can you insure a property like these in that location with all of those considerations?.
“Before anyone buys this kind of property, you must speak to an insurance company and understand what those implications are,” she says.
Sandkuhler says it’s easier to get it wrong than to get it right and that’s why it is important not to become emotional about the target property, making it more difficult to make good clearheaded decisions.
“There is value in seeking independent advice. This is really an insurance policy to ensure you’re not making a mistake, whether it’s a $600,000 mistake or a $2 million mistake. That’s where getting independent and professional advice from an industry experienced buyer’s agent comes in.”