Recently, residential vacancy hit a 16-year low due to poor investor activity over the last five years. According to the Property Investment Professionals of Australia (PIPA), a non-profit association of industry practitioners, this critical lack of rental properties must be addressed with key policy by whoever wins the upcoming Federal Election.
Nicola McDougall of PIPA
Since 2017, the nationwide lending restrictions with fewer interest-only loans and higher interest rates prevented investors from purchasing. Nicola McDougall, PIPA chair, said while investors made a return to the market last year, the effect of their absence for years before that is still felt by tenants.
“At the same time, asking rents were mainly benign, so the combination of higher mortgage costs together with flat-lining rents were also an impediment to the investor market.”
CoreLogic analysis found that investors were slightly up from the record low (32.6% of mortgage demand by value in January 2022 from 22.9%), but still below the decade average.
Source: ABS lending indicators Jan 2022 and CoreLogic
As of February 2022, the national residential property rental vacancy rate fell to 1.2%. SQM research shows the rate to be less than 1% in Brisbane, Adelaide and Perth while asking rents there are increasing almost 13-to-20%. Available rental properties plunged in the Melbourne and Sydney CBDs as well, but capital city asking rents have soared 9.4% over the year to March.
PIPA say political parties must develop a significant and sustainable policy to remedy this in the vein of the National Rental Affordability Scheme which was unfortunately scrapped after only a few years. A system that encourages private and public sectors to work collaboratively together will increase rental supply and improve affordability for tenants.
“With overseas migration set to soar over coming years, where are these new Aussies going to live if we don’t even have enough rental properties to house our current population?” asks Nicola.
PK Gupta, a second generation immigrant, shares how he acquired 12 properties worth $8million by the age of 32 and had most of the deposit for the first property saved while still at university.
After PK’s parents moved to Australia from India so he could attend university, he met his now wife. They shared a goal of not wanting to be trapped in 9-to-5 day jobs and dedicated themselves to raising funds. During holidays, they worked picking fruits or doing summer internships with major firms. They saved every cent, even after entering the finance industry.
Despite being Brisbane locals, a lot of research led to a three-bedroom house in East Gosford, NSW catching the couple’s eye. PK says they bought it for $320,000 without ever seeing it. Instead, they had a property manager inspect several homes for them for free.
PK continued to apply his analysis to unearth other opportune markets. He says that first property went up $40,000 in value in the first year. They now have properties in Brisbane (QLD), Frankston (VIC), Newcastle (NSW), Cairns (QLD), Burnie (TAS), Gold Coast (QLD), and Townsville (QLD). The most lavish might be a home near the Taj Mahal, purchased for $480,000 (now valued at $600,000).
“Investing in markets across the country is entirely achievable for the average Australian,” says PK. He is now keen to educate others on the investment game and shares his top five tips to break into real estate:
Set goals and focus on achieving them: Have goals and drive towards them wholeheartedly. Their first deposit was hard work but the commitment paid off in huge dividends.
Treat all of Australia as an opportunity: Don’t limit yourself to investing where you live. Apply your analysis to every location in the nation. You’ll get the chance to select from the very best suburbs for gains.
Invest by numbers, not emotion: The most important thing is understanding how to analyse the available data. Using the right metrics and applying them correctly will have areas of opportunity for growth and great rental returns reveal themselves.
Ask property managers for help: Local property managers are professionals who are happy to help you if you give them your management. They are an extraordinary pool of untapped guidance.
Get educated: Being educated in a systematic, data-led way is crucial so you aren’t led astray by misinformation or biased agendas.
These five points can help you build passive income by remotely acquiring properties interstate with minimum fuss.
If you’re looking to create wealth by investing in the property market, there are only two surefire ways to boost growth in a steady market.
It can be difficult to make money in a steady or declining property market and the current conditions suggest 2016 will be a pretty quiet year compared to previous high growth periods.
There are, however, two ways in which you can invest in the property market for growth: one is to buy well in an up-and-coming location, and the other is to improve the property through renovation.
Every area has peaks and troughs and it doesn’t take a genius to tell you that you need to buy when property prices are low before the neighbourhood hits its straps and becomes the area’s next rising star.
The good news is you don’t need a crystal ball to do this, just some time and effort to do research and a willingness to take a bit of a punt on the next big thing. Here are some of the traits common to high growth areas.
They are on the fringe of popular suburbs.Take a look at the suburbs that are doing well commercially, then look at the neighbouring suburbs that are not quite at that level yet. You will start to see bargains in the fringe suburbs where properties are comparatively undervalued.
They follow a logical geographical path. Every metropolitan area has geographical limits. Where I sell, Sydney inner city suburbs, we have the harbour through the metropolitan area and the mountains to the west. When you look at the CBD, you can see there is only really one direction that offers high growth returns—towards the south. Everywhere else is full in price and has less chance for strong capital growth over a short period of time.
They are looking to improve. One key indicator of a potential high growth area is when people start investing in it. That could be existing residents fixing up their homes or the government starting new projects, so take a closer look at plans for infrastructure, in particular transport and other amenities such as shopping centres and community facilities. These types of projects will kick start a community and draw attention from non-local residents, which will in turn result in people investing in the area, creating high growth.
They start as lower socio-economic areas. It’s difficult to achieve high growth when property prices start high, so focus on lower socio-economic demographic neighbourhoods that have a lot of potential and are geographically in the growth corridor, keeping in mind the new projects planned.
They are undergoing a generational or zoning change. As soon as the demographic of the area grows old, the neighbourhood has the potential to be the next high growth area as it rejuvenates to cater to young renters and buyers, and young families. Similarly, when an area transitions from an industrial zone to a commercial and residential zone, it’s a chance to develop a space for the needs of the incoming community.
Other things to look for: proximity to sought-after schools, access to beaches or waterways and focusing on elevation and ridge views as a general rule. These type of properties sell better due to views and light.
Create value in the property
Don’t expect magnificent returns just by buying and selling the property at the right times, even if you do invest in the right location. You should also look to create value in the property through renovation, which is also a must if you want high growth but can’t buy in a high growth area.
Most people make standard cosmetic changes to make the property more presentable, perhaps an update to the bathroom and/or kitchen and a paint job, which is usually enough to make a small gain on the investment after expenses.
Real value, however, comes from creating something in addition to updating what’s already there. This includes:
An extra room
An extra bathroom or toilet
An off-street parking space or garage
Studio or granny flat above the garage
A deck or outdoor living/entertaining space
Landscaping the yard
Developing and rezoning to make way for apartments
Together with good presentation and a savvy purchase in an up-and-coming area, a property with this extra value can really boost your investment return.
