By Guest Blogger, Terry Ryder, founder,
hotspotting.com.au and propertyU
The question I’m asked the most is: where’s the best place to buy?
Frankly, this is a dumb question, because there’s no right answer. The answer, fundamentally, depends on the individual investor.
The best place to focus may be different for each person, depending on their age, income, borrowing capacity, risk profile, objectives and strategy, and what they already own.
Australia is a big country, with many possibilities - there’s not one location that stands out above all the rest.
Good places to buy abound in this nation and that’s always the case, regardless of the state of the national economy, public sentiment and trends with interest rates.
There are, however, core criteria that should be part of any strategy. Here are some of the considerations to keep in mind:-
What are the key drivers of growth?
Locations that out-perform the general market tend to have the following characteristics:
- strong and diverse local economies,
- growing populations,
- attractive lifestyle factors, and
- a big infrastructure spend.
Places which have those fundamentals and have had exceptional price growth in recent years include Geelong in Victoria, the Sunshine Coast in Queensland, Newcastle and Orange in NSW and Launceston in Tasmania. There are many other examples.
Will regional locations continue to outperform the cities or will the exodus trend reverse?
The Exodus to Affordable Lifestyle trend has been the single most powerful force in real estate in the 21st Century so far.
Contrary to media misinformation, the population drift to the regions did not start in the Covid period – it has been under way for much longer and has been fundamentally driven by technology (enabling people to work remotely) and the desire for a lifestyle with affordability.
This trend is here to stay. Affordability will continue to be a key driver of this.
At the same time, some of the smaller (and more affordable) capital cities will do well in the next few years, including Adelaide and Perth.
What are the main traps that property investors should avoid in the coming 12 months?
The greatest trap is absorbing media headlines and sound bites - and believing the doomsday rhetoric. The key is to do real research and think/act independently. Most people are herd animals and will react to media sentiment.
Here’s one example of what I mean: CoreLogic publishes its price report on the first of every month. The CoreLogic press material and the media coverage will invariably emphasise the negatives and ignore the positives. Don’t read what the media says is in the report – get a copy of the report itself and look at the numbers (the report is free and readily accessible).
Another trap is being careless with locational choice. In the 2020/2021 boom (which continues in 2022 in some locations), people behaved as if they could buy anywhere and get capital growth. In the new environment, investors need to be choosy about location.
How can property investors take advantage of a slowing and changing market?
There’s no doubt the market has slowed in some parts of Australia, although it remains busy and competitive in many places.
A changed market can represent opportunity for investors, because there is less competition and there is the possibility of buying at an attractive price, compared to 12 months ago.
Consider this scenario: vacancies are at record lows, rents and yields are rising, and, in some locations, prices have contracted. This presents a great equation for investors: less competition, cheaper buy-in prices and very strong rents, to compensate for higher interest rates.
Will interest rate rises deter property investors for a significant period of time?
Some will be deterred but they should not be.
Anyone contemplating real estate investment with the correct mindset will realise that the property they buy today is likely to remain in their ownership for the next 20, 30 or more years. During that time, interest rates will rise, fall, rise and fall again. In that scenario, current trends with rates are irrelevant.
Keep in mind also that ultra-low vacancies mean that rents are rising fast and higher yields can compensate for higher interest rates.
How much research should an investor do before buying? And what does this research look like?
Research before buying is essential. And research does not mean reading newspapers or other media sources.
It means accessing information from multiple sources to look at sales activity, vacancies and rents, economic data and infrastructure projects that are happening.
This can be time-consuming so the smart investors will be willing to spend a small amount on accessing research reports from reputable sources and on advice from genuine experts.
The most successful investors are those who are willing to pay for quality information and engage experts such as an independent buyers’ advocate for advice. The outlay is small relative to the cost of the property you might buy - and may even save you money with their negotiation skills.
Not to do so is the worst kind of false economy. You have to spend money to make money.
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call us on 1300 655 615 today.
