Terry Ryder on where he would invest $10k
Build your team before you build your portfolio. That's an essential attitude for anyone attempting property investment.
Most Australians treat property investing as a hobby. The successful ones regard it as a business. And, as with any business, you have to spend money to make money.
Creating a team of expert advisers is essential to successful investment - for example, a good mortgage broker, an accountant who understands real estate, a specialist lawyer, a quantity surveyor for depreciation reports, a trusted research source and a good buyer's agent.
You have to be willing to spend on good advice and good information before you spend the big money on a piece of real estate.
So, I would invest $10,000 in good advice, on the road to acquiring another investment property. And a big chunk of that would go towards a buyer's agent. I have the expertise to find the right property in the right location. What I lack is time.
So I use a buyer's agent.
It's always money well spent. Agents save me time, they organise the due diligence checks and they usually negotiate a good price, thereby saving me their fee and more.
Kate Hill, of the Adviseable buyer's agency, sums it up: "It's not just saving the cost of our fee by negotiating a good price. We'll stop you from buying a massive lemon that's unlikely to grow in value."
How the pandemic opened up new must-watch suburbs
There's a property boom that most of the media is missing. And it's not happening despite the pandemic, it's happening because of the pandemic. Markets around Australia are pumping strongly.
But because they're not in Sydney or Melbourne, we're not hearing much about them.
A number of key trends have emerged, all of them having a positive impact on local real estate. The main ones are:
Virus-beating cities are strong
Capital cities that got the virus under control early and firmly have solid to strong property markets. Life is relatively normal, businesses are open and consumer confidence is strong.
Perth is the best example. The WA economy is rising, helped by an emerging resources boom. Perth housing markets are reacting to low vacancy rates, with upward pressure on rents. First-home buyers are active, with land sales rising 126% between the March and June quarters. Perth is currently the most searched city on Google for prospective buyers.
Other cities where the virus was corralled early and now have busy property markets include Darwin, Adelaide and Brisbane.
Exodus to affordable lifestyle
This is one of the strongest trends to hit Australian real estate in the 21st century. It was a rising tide before the pandemic, with increasing numbers of people realising the possibilities of working remotely.
The pandemic lockdowns, which forced people to work from home, have opened the eyes of more Australians to the potential. This has supercharged the trend, making it the driving force of markets across Australia.
"People have been leaving the big, expensive cities for some time," says Simon Pressley, of Propertyology. "Sydney loses 20,000 to 25,000 to internal migration every year. The only capital cities that gained population from internal migration in 2018-19 were Brisbane and Hobart. The next set of figures will show an even bigger surge towards the regions."
Buyer's agent Kate Hill, of Adviseable, says regional centres like Geelong, Newcastle, the Sunshine Coast, the Central Coast, Ballarat and Bendigo are all booming.
First home buyers are rampant
The number one cohort among real estate consumers is first home buyers. Levels of government assistance have never been higher and interest rates have never been lower. Investors are largely on the sidelines, so there's less competition for first-timers.
There's never been a better time to be a first home buyer, provided you have secure employment. And the opportunity has been turbocharged by the pandemic.
Aussie Home Loans data suggests that home loan pre-approvals have grown 71% since the start of the year and over half of all pre-approvals are for the first home buyers.
Research published in September indicated that, in most locations across Australia, it's now cheaper to buy than to rent.
Low vacancies predominate
Australia, with a few notable exceptions, has had low vacancy rates for a while. It sounds counter-intuitive, but the pandemic has pushed them lower. Covid-19 has discouraged investors from buying, it has deterred vendors from selling and it has made developers less likely to build. There's a shortage of properties to rent and there's a shortage of properties for sale.
Many locations have the lowest vacancy rates ever recorded. Vacancies below 1% have become the norm around the nation.
When vacancies are that low, rents must rise. They're falling in Sydney and Melbourne, but elsewhere the trend is to higher rents. And when rents are rising, prices will follow.
The outcome is an unheralded boom
CoreLogic figures published in October showed most Australian markets recorded price growth in September, continuing real estate's defiance of the pandemic. Only Sydney and Melbourne fell; the other six capitals and most regional jurisdictions recorded growth.
"The issue is that there isn't enough stock so it's very competitive for buyers," say Kate Hill. "There are more buyers than sellers so prices are rising."