Annual inflation rose to 6.1%, the latest inflation figures released on Wednesday showed. It all but confirms another cash rate hike next week, and reinforces the importance of long-term property investing.
Now is a good time to lean on insights to guide your decision-making.
In this newsletter, we’ll tell you what’s on the minds of other Australian property investors, investment locations they’re eyeing and the strategies they’re using to build wealth.
- While annual inflation came in at a 21-year high, quarterly inflation has inched lower - a sign that we may be moving past the peak.
- Those who own multiple investment properties with at least one in Queensland are bracing themselves for a bigger tax bill next year that will factor in their interstate properties.
- This opinion piece explores both sides of the housing affordability equation: government inaction for decades and personal responsibility.
- Rental property searches shot up by 71% in June 2022, according to Proptrack data.
- Searches to buy properties also increased, but by 7% - about a 10th of growth in rental search activity.
- Property hasn’t lost its appeal for investors as a way to grow wealth, according to findings from Momentum Wealth’s Property Sentiment Report 2022.
- A quarter of the +700 survey participants intend to buy an investment property in the next 12 months, with 18% ready to invest.
Why not invest now?
- 16% are deterred by insufficient savings or equity for a deposit.
- 15% attributed their inaction to life circumstances.
- 13% believe now is not the right time to buy.
- 10% are worried about how economic conditions might affect the property market.
Where to invest?
- Perth was top of mind for most participants, with 40% naming the WA capital as the best place to buy an investment property.
- 32% chose Brisbane as their investment city of choice.
- Brisbane was particularly popular among those in NSW and Victoria.
- 44% in NSW and 42% in Victoria picked Brisbane as their preferred investment destination.
- Sydney ranked third at 11%.
What to invest in?
- 83% of participants chose established houses as one of their top 3 property types to invest in.
- 49% were attracted to townhouses/villas.
- 45% included new house & land in their top 3 investment options.
- 35% had apartments/units in their sights.
How to invest?
- The majority (60%) prefer a hybrid investment strategy of both capital growth and cash flow.
- 23% are focused on capital growth.
- 8% are targeting cash flow.
When to review financing?
- 64% have assessed their property loan(s) in the past 12 months
- 19% said they looked at it 12-24 months ago.
- 7% said they reviewed their financing more than 2 years ago.
- 10% don’t think they need to.
How to manage?
- 79% of investors surveyed use a property manager.
- Of those who do have their portfolio managed professionally, 63% haven’t benefited from advice on adding value to their investment property.
AFFORDABILITY
If you look at the wide affordability gaps between the capitals, it makes sense why 40% of investors chose Perth as their preferred city to invest.
Nationally, mortgage repayments account for 37.3% of the family income.In NSW, 46.5% of a household’s income goes towards servicing average home loan repayments, according to REIA data. In Victoria, the proportion required is 38%. Both are higher than the national average.Compare that with Perth, where only 26.6% is needed.
FINANCING STRATEGY
Reviewing your overall financing strategy and investment loans regularly can help save you money in the long run. Given the rising rate environment we’re in, it’s especially important to keep your finger on the pulse of the loan market.
Staying on top of your loans can help by ensuring that:
- you’re on a competitive interest rate
- your loan structure is still suited to your investment strategy and goals.
For example, if you - like 39% of participants - are on your journey to expand your portfolio, making interest-only repayments is one option to help you free up cash flow.However, if you - like 22% of participants - are seeking to consolidate your portfolio, it may not be a good idea to fix your rate, as this could mean expensive break fees when you decide to sell.
ACTIVE INVESTING
Most property investors aren’t getting advice from their property managers on recommended value-adding opportunities. This means many investors may not be maximising the full potential of their investment.
Sometimes, even minor improvements in a strong rental market can lead to an increase in rents. It’s something that’s even more crucial for investors to consider, given rising rents amid an easing property market.
23% are being held back by either factors relating to the economy or property market. These short-term factors are less relevant if you plan to hold investments over the long term. History has shown us that while short term fluctuations may seem critical at the time, their impacts are less significant over many years.
Prices at a glance
Houses
Units
Overall, the rate of decline recorded across the capital cities over June 2022 for both houses (-0.9%) and units (-0.5%) accelerated at twice the rate of the month prior (-0.4% and -0.2% respectively).Adelaide property prices showed the strongest overall growth in June of 1.3%. It has been the only capital city seeing a monthly growth rate of above 1.0% since May.Sydney prices fell the hardest among the capital cities for both houses and units, though it is still recording annual growth across both property types.
