Australia has long been a popular country for property investment. Many see it as one of the world’s most stable markets, with consistent capital growth and low vacancy rates. It also benefits from a favourable exchange rate, particularly for the US, UK, and European investors.
However, Australia is a large country with a diverse property market. There is also a lot of interest, both domestically and internationally, in investment properties. This means that a good deal can be hard to find, and even harder to secure.
The good news is, there are plenty of great opportunities in Australia if you know where to look. If you are thinking about buying an Australian investment property, here are a few things you should consider.
Understand the different markets
According to Luke Moroney, CEO of Search Party Property, a leading Australian Buyers Agent, investment opportunities vary between locations. He says two of the country’s biggest markets, Brisbane and Sydney, highlight how different property investment prospects can be.
‘Generally speaking, most investors will look at the biggest cities, believing these will be the strongest markets. But, like Brisbane and Sydney show, different markets go through different stages at different times. Anyone considering investing in Australian property needs to understand and closely monitor this cycle’, Luke says.
As at the start of 2021, Brisbane is experiencing near-record low rental vacancy rates. This means that there is significant competition for most properties, and many are being leased over their advertised rate. As sale prices have not increased at the same rate, rental yields are generally increasing.
By contrast, Sydney has seen a bit of move away from renting and toward homeownership. As such, median rental prices have plateaued in many areas, while sale prices continue to grow. This means that, at least in the short-term, Sydney is not the strongest market for rental returns.
There are also a number of regional “lifestyle” locations, like the NSW Central Coast, that are booming. These areas are usually near a major city and seen as an affordable alternative for those willing to commute further. While sale prices are spiking in many of these locations, so are median rents, so good returns are still possible.
Research the local market
One of the best things about investing in Australia is that property data is readily available. It is a highly structured market and information on everything from pricing trends to legal requirements is easily accessible.
The vast majority of properties, both for sale and for lease, are listed on the country’s major real estate sites – realestate.com.au and Domain. This makes it extremely easy to research available properties and check potential rental returns. These sites also provide a wealth of other useful information to help you better understand the local market.
If you are not familiar with the Australian rental market, you should take some time to understand the local rental laws. These vary slightly from state to state, so you will need to look for those relevant to your target area. The state’s Real Estate Institute (e.g. the REIQ for Brisbane, Queensland) is usually a good place to start.
Run the numbers
As with any investment, it is important to understand what you need to put in and what you are likely to get out. This basic calculation is a useful way of determining whether an investment is worthwhile and suits your investment strategy.
To help you with this, there are a number of publications that in local market movements and recommend top suburbs. These usually calculate median rental yield and look at changes in median sales prices over the short and medium terms. Many also provide detailed information about sales volumes in the area and other key market statistics.
An important caveat here – most Top Suburb lists are based on potential rental yields and should only be used as a guide. As they compare median sale prices and median rent rates, they skew toward areas where property prices are lower. While these locations may still offer great investment opportunities, you should also check the demand for rentals in the area.
It is also important to take a holistic view of the costs associated with your investment. In Australia, you will need to account for taxes (stamp duty, council rates, etc.), maintenance costs, and property management fees. These expenses can add up quickly, so it is important that any potential rental yield calculations take them into account.
Optimising the period of your investment
Acquiring and offloading Australian real estate assets can be a lengthy and expensive exercise. As such, buying a property in Australia should be seen as a medium to long term investment.
In fact, many market experts recommend holding on to Australian property for between seven and ten years. That being said, the ideal investment period will depend on a range of factors, including your investment strategy and goals.
I hope you got value from reading How to Find the Best Deals for Property Investing in Australia.
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