What Types Of Properties Should Investors Be Targeting In 2019?
It’s a jungle out there for those buying investment property in 2019 and, as a result, it can be a true test of the survival of the fittest.
Buying for capital gain or a good rental return was a cinch for the past three boom years, but now investors have to proceed with a great deal more caution.
“It’s a new world now,” says buyers’ agent Chris Curtis, managing director of Curtis Associates. “No one should buy residential investment unless it survives the most brutal due diligence.”
The banking royal commission, for example, is hampering lending and rents, especially in Sydney, are falling, he says.
Then there’s the upcoming federal election and the prospect of changes to negative gearing and capital gains tax.
This has all led to a significant decline in investor activity in the residential market in the past 12 to 18 months and people are now looking for different types of investments as a consequence, believes Dennis Vertzayias, the national director and head of NSW residential project marketing at Colliers International.
“In my view, the traditional ‘financially-driven’ investor will become a ‘lifestyle’ investor,” he says. “We will see a lot more investors buying properties which have flexibility for personal use, for themselves or their family members to occupy the property sometime in the future.
“That lifestyle investor will not be driven purely by yield, returns or even tax benefits but the overarching requirement will be a strong focus on the property’s flexibility for personal use and a reliance on longer-term capital gains rather than short-term yield.”
With that in mind, investors will be seeking out quality design, floor plans, interior spaces, fixtures and fittings, as well as boutique blocks, locations near shops, restaurants and transport and even good orientation and views, he says.
So where should investors look for these kinds of properties, and which areas are anticipated to see the best growth?
Here, investors should be looking at Melbourne’s middle-to-outer western and northern suburbs, advises Frank Valentic of Advantage Property Consulting, saying they can be the most affordable and have the most potential for growth as they tend to lag behind.
“Suburbs including Reservoir, Thomastown, Lalor and Fawkner in the north and in the west, I would look at areas like Ardeer, Deer Park, West Sunshine and St Albans,” he says. “The type of property investors should be looking for is ideally a house with some land or a townhouse or unit with some land content, and if they want to get in a bit closer to the CBD look at units or townhouses.
“For units, I would be looking into more the middle suburbs, about a 10-kilometre radius from CBD. In the north, look in Preston, Coburg and Coburg North and in the west look at Sunshine, West Footscray Yarraville and Kingsville.”
Vertzayias tips the Sydney city fringe, the eastern suburbs, northern beaches, the lower north shore and even some of western Sydney’s emerging hot spots. “A sure telling sign of a high-quality location is one where the DA is extremely difficult to achieve,” he says.
In addition, seek out areas with rezoning potential and in urban growth corridors, recommends Real Estate Buyers Agents Association president Rich Harvey. “The Sydney Metro plan outlines several areas of higher density which will be ideal for investors,” he says.
“Also, areas with new infrastructure coming on line or planned for the future, like light rail or road projects due for completion, which make commuting much easier.
“Then there are suburbs suitable for families that are in middle-ring areas but still within a 30 to 40-minute commute of the CBD.”
Harvey believes the Sydney market has already experienced most of its drop. “So, the first three to six months of 2019 will present some of the best buying opportunities for investors to get a foothold in the market while there is less competition,” he says.
“Houses are likely to outperform units in most cases, due to land restrictions and lack of supply. However, well-positioned units in boutique blocks close to transport and shops can do equally as well and are more affordable.”
Forecasters BIS Oxford Economics say Brisbane will fare best among the capitals, with 13 per cent property price growth predicted by 2021.
With a steady flow of Sydneysiders and Melburnians moving to Queensland and looking at the state as a good investment prospect, Brisbane’s property market is bubbling along nicely, says investment advisor Michael Yardney.
“Within Brisbane, southern migrants and local upgraders are favouring premium property in blue chip inner-ring areas close to the CBD and the river which has led to above average growth in desirable neighbourhoods like Hamilton, Paddington, Bulimba and Auchenflower,” Yardney says.
A number of property markets in regional Australia are doing extremely well and make excellent investment prospects, says Propertyology head of research Simon Pressley.
“Some reached boom proportions during 2018 and we expect that to continue for some years yet,” he says.
Pressley highlighted the Moree Plains local government area in NSW, with 24 per cent growth in the year ending September 2018, based on Propertyology’s research. In Victoria, he pointed to Baw Baw at 20 per cent, Mitchell at 19 per cent and the Central Goldfields at 16 per cent, as well as Isaac in Queensland at 17 per cent.
Locations outside capital cities offer the best opportunities, according to Pressley. “Housing is more affordable, annual cash flows are stronger, the housing supply is tight and economic conditions are good,” he says.
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