Australia’s Eastern Seaboard investment property market is so attractive right now, I must ask, why aren’t you buying an investment property? Prices have dropped, rents are rising and access to funding or credit is easing So, I ask again, why aren’t you buying an investment property. Let’s look at the numbers.
As you would be aware the markets peaked in late 2017 and we have seen 17 months of correction. We may be able to see the bottom of the market as the rate of decline has slowed significantly in the past 3 months.
The change in dwelling values since the market peak show the following results. Sydney -13.4%, Melbourne -10.3%, Brisbane -1.6%. It is important to note that despite the broad-based weakness, the national index remains 15.9% higher than the same time 5 years ago. The graph highlights this result and identifies the 20-year growth of the 5 major capital cities. So, property is cheaper now than 18mths ago and history shows you a rise comes after a fall. So, no Excuses!
It is true that the past two years has seen a tightening of lending conditions on the back of the Royal Commission and the enquiry into the banking sector. However, recently we have seen several majors and 2ndtier lenders begin to compete for your business and it is not uncommon for our Finance team at Launch Money to be securing rates in the mid 3% region. Certainly, funding is at 60-year lows with many economists suggesting further cuts are possible later in 2019. So, funding is cheaper now than in your lifetime to date. So, no Excuses!
The return investors can expect on properties across Australia’s major cities is on the rise, with pockets of Sydney and Melbourne seeing the biggest improvement as house price falls, data shows.
Rental Yields, that is the value of the rent received against the purchase price of the property shown as a percentage are also rising. The reason for this is the supply of property into the rental pool has dwindled. The reasons for dwindling supply are several but include:
- Investors moving out of the market prior to or after the peak.
- Previous rental properties being purchased by owner Occupiers taking advantage of correcting price points.
- Supply of new dwellings in the capital cities peaked in in 2018 and forecast releases are well below average
As at the end of March the rental yields for units and townhouses increased across all the major capital cities. So, no Excuses!
Federal Election 2019
Ok so let’s address the Elephant in the room. Federal elections have always generally caused some concern which is likely amplified this time given the potential for a change of Government and the focus on two key taxation issues that will affect investors. The 2019 Federal Election has raised the questions of changes to Negative Gearing and Capital Gains Tax. If elected the opposition have flagged that changes to Capital Gains tax and negative gearing would take effect from Jan 2020. To better understand the potential changes, you can read the policies on the links below:
At Launch Properties we have always taken the stand that property should be purchased for the increase in personal wealth achieved via capital growth. Any taxation benefits in the system that provide some cashflow relief are a bonus, but investors should take the long-term view and ensure the short-term ups and downs are within their budget.
Overall the housing market has shown some signs that the downturn in dwelling values is losing some steam, although positive, the outlook for the housing market will continue to be affected by uncertainty related to the federal election, lending policies and more broadly domestic economic conditions- source: RpData Core Logic
Are you in Australia’s top 8%?
These figures regularly surprise people when I discuss them. For many they suggest how difficult it is to get into an investment property, for me it suggests how few people can see beyond next year, looking to 5, 10 or even 15 years. Phrases like, ‘I wish we had bought back then’ and ‘if only we had known’ are spoken and I just point to the data and say what are you waiting for?
Census data from 2011 and collated data from RpData Core Logic show that as little as 7.9% of Australians own at least one investment property, this figure excludes the family home.
Let’s break that down further:
- 5.75% of Australians own 1 investment property
- 1.42 % of Australians own 2 investment properties
- 0.43% of Australians own 3 investment properties
- 0.16% of Australians own 4 investment properties
- 0.065% of Australians own 5 investment properties
- 0.0068% of Australians own 6 or more investment properties
If you are among the group of people that will look at this data and take action to secure an investment property whilst the conditions are the best they have ever been in recent history, then you’ve made that all important first decision. The following decisions you need to make are what, where and why, and that’s exactly why Launch Properties was created. You can take a look for yourself at what we do at Launch Properties.
About the Author:
Steve Purcell is located at our Sydney office and is the licensee of Launch Properties. He holds a PSBA License, is a licensed Auctioneer and holds a Masters Degree in Business. Steve brings an extraordinary depth of hands on experience to the role including twenty years in commercial and residential construction, followed by ten years in residential Real Estate sales and property development. This unique blend enables Steve to advise his clients on selected developers, to ensure they are providing functional, quality assets with high quality finishes to mitigate potential sector risks to our clients. Become a client of Stevens and get access to RP Data suburb reports, market valuations and advocacy options.
Steve Purcell can be contacted on 1300 925 081 or by email on firstname.lastname@example.org
Disclaimer: The information, analysis, provocations, suggestions and opinions contained within this email are provided by FPS Property Pty Ltd (ACN: 169 144 361) t/as Launch Properties under Property, Stock and Business Agents Corporate Lic # 10022396. You should consider whether the information or advice contained in this email is appropriate to you having regard to these factors before acting on it. You should seek personalised advice from your financial adviser and your accountant before making any financial decision in relation to matters discussed in this email.