Australia is experiencing a shortage of housing to buy and rent, and there are good opportunities in the current circumstances for property investors.
Property investment expert Tim Graham of Reventon says in the current competitive market investors can still do well if they buy in the right areas.
“It has been a challenging market for over 12 months now,” Graham says.
“People are looking to us to find value and I’ve got to say with low supply in the market if you’re looking at investment hotspots at the moment, it’s not uncommon to see a property sell for $50,000 to $60,000 over listing price.”
Graham says the market is moving quickly and it is essential that investors are working with the most up-to-date data available.
“It’s really important that people always understand that markets are cyclical. When one market’s up, the other one might be down and it’s really important to understand the data,” he says.
The good news for investors is that, once they do purchase, vacancy rates are so low (under 1% nationally) that tenants are lining up and prepared to pay high rents to secure something.
Graham says, when looking for where the value is for investors, it is now more apparent than ever that the regions offer good value.
He says capital city markets, which have much higher median prices, experienced at least 20% increase in values in the past 12 months.
“But what we are seeing is that there is still really good value in the regions,” he says.
The trick is finding the right region, which allows investors to secure a well rented property.
“The way that we do that is we target the $450,000 to $650,000 bracket,” he says.
“And a house that’s got a good land component will give you good capital growth.”
When investing in regional towns Graham says they avoid looking at properties priced higher than $650,000, as that is when the rental yields start to drop away.
Buying for under $450,000 can also be problematic as it is generally the price point for older houses which often come with higher maintenance costs.
Graham says the best starting point for investors is to always be well informed and keep up to date with the latest data.
- Investors need to watch vacancy rates and asking rents and identify any trends of markets either declining or rising.
- It’s also important to look at average incomes within a region to gauge how much residents can afford to pay in rent.
- Distance from the closest capital city, population size and future infrastructure spending are all important as well.
Graham says Toowoomba is a good example of how big infrastructure spending can drive property values.
It has a new airport and the inland rail hub which have transformed it to a strategically important regional city.
The latest CoreLogic figures for Toowoomba show its dwelling values increased by 1% over the month of March and rose 2.6% in the March Quarter, up from 1.9% reported over the December Quarter.
Graham says while housing construction has boomed throughout the pandemic what was being delivered is still the bare minimum that’s required to meet demand nationwide.
“We really need to be adding to Australia’s roof lines again,” he says.
He warns the reopening of Australia’s international borders will put even more pressure on the housing market as Australia’s economy needs skilled migrants to fill its workforce shortages but they need somewhere to live.