As the property market transitions from frenzied to normal, we return to the reality of property investing and should expect more realistic capital growth numbers.
On the rental front, the market is favouring landlords but that doesn’t mean property investors can simply invest anywhere for a good return.
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On the rental front, the market is favouring landlords but that doesn’t mean property investors can simply invest anywhere for a good return.
What does this mean for you?
While some think that it’s not an optimal time to buy an investment property due to high prices, relatively slower growth, and rising interest rates, there are clearly still many great investment opportunities at affordable price points. However, property investors will need to get comfortable with the idea that the days of 20%+ capital growth may have passed. It may take more detective work to identify the hidden gems as the market returns to ‘normal’.
- Looking at the data, overall regional property growth is far outpacing that of capital cities. Housing prices in the combined regional markets shot up by 5.1% in the past quarter, more than 3x the 1.5% growth seen across the combined capitals.
- Buying in the right regional areas or in outer ring suburbs can be a wise investment decision, especially if inner-city pockets are starting to look expensive. Some of the factors to look out for when investing further afield include:
- level of affordability
- the long-term economic outlook for the area
- diversity of industries in the economy
- the level of investment going into local infrastructure
- local lifestyle offerings
- Only weeks ago, the federal government announced plans for the new Regional Home Guarantee (RHG), which allows regional homebuyers to buy with a deposit of as low as 5% without paying costly LMI. What sets the RHG apart from the other homebuyer incentives is that it’s open to people who have not owned a property within the past 5 years, as well as first-home buyers. It’s also not limited to Australian citizens – permanent residents are also eligible. These two differences will attract a new cohort of buyers to live, work and invest in regional areas. This scheme is widely expected to drive interest in regional markets.
- This week, the federal government committed to lifting the price caps for properties purchased under the Home Guarantee Scheme. Effective from 1 July 2022, thresholds have been increased by $250,000 across the ACT and $100,000 in all other capital cities & regional centres. What this means is the budgets of potential home buyers will increase and target markets for potential buyers will be expanded. This is expected to have a flow-on effect of boosting the property values of a larger pool of investors.
- The average investment property value is $751,800, according to new data from BMT Tax Depreciation.
- This is $168,300 lower than the average price of residential dwellings, which sits at $920,100, according to the ABS.
- Melbourne is predicted to overtake Sydney to be the largest city in Australia by 2054 with a population of 8.9 million, according to a projection from Bernard Salt.
- Foreign residents are staging a comeback, with Victorian rental property searchers from abroad soaring by 40% in the March quarter when compared with the same period last year.
- This proposed $350 million apartment skyscraper in Perth could become the world’s tallest “hybrid timber” building at 183 metres, if approved.
Prices at a glance
Houses
Units
- Housing prices in Sydney & Melbourne continued to ease for a second month in a row and are falling behind more affordable markets like Canberra, Adelaide and Brisbane. Price growth on a national level is also slowing its pace, albeit more gradually.
- Regional markets appear to be well-insulated from the slowdown seen in the rest of the country, recording 1.7% growth across houses & units in the past month, compared with 0.3% in the combined capitals.
