It’s time for investors to put on their future spectacles and start assessing the financial outlook for the new year.
BY CATHERINE CASHMORE
Considering the current flat market and negative press surrounding sales figures, only those vendors who need to sell in 2011 are likely to do so. However buyer demand looks set to increase now we have some clarity over increased banking competition, and the Reserve Bank of Australia indicating interest rates ‘may’ be on hold for a while.
The Victorian state election resulted in a win for Ted Baillieu and with a new face comes fresh optimism. As well as incentives to purchase in rural suburbs, Melbourne’s metropolitan prices are likely to see a boost when (and if) Ted Baillieu’s promised 20 per cent cut on stamp duty for first home buyers comes to play on July 1 2011 for properties below $600,000.
However until supply tightens again, and the over-hang of stock still on the market clears, the window of opportunity for buyers remains open – albeit for a limited time!
There has been a slight downward trend in the number of foreign students and immigrants coming to our shores, however population is still rising and there isn’t enough suitable ‘family’ accommodation to fulfil the need. It’s important to understand when we talk about shortage of stock, we’re not talking about a lack of property.
Plans have already been rushed through for a rumoured 35 per cent increase to the existing supply of high-rise apartments in Melbourne amidst numerous complaints from both residents and councils. The high-rise culture has tilted the market leading to oversupply for one demographic, yet not addressing the undersupply of mid-sized family homes. Building high-rise rabbit hutches or luxury penthouses is going to be of little advantage to homebuyers, just like building new properties in far off neverlands with only a ‘promise’ of improved transport facilities and schools.
As an investor the aim should be to lower your risk profile while also maximising capital appreciation. In a strong market most properties sell well, however in the downward phase of a property cycle, only those properties that attract competitive buyer activity are likely to achieve maximum price. Therefore steer clear of the high-rise culture and concentrate on homes that will always attract demand. Here are a few tips:
Find the rose amongst the thorns
In a soft market high in supply, it’s the scarcity factor that underpins growth. A unit in a high-rise block of flats is unlikely to attract as much attention as an apartment
in a small boutique development. Concentrate on homes that stand out from the crowd.
Unit or house?
Properties perform differently depending on the suburb they’re in and it’s important to understand the dominant buyer profile of the area you’re searching in. For example, inner city suburbs are high in density with a landscape that features apartments and townhouses. Areas further from the city feature detached houses and generally attract families. Purchase a property that suits the suburb characteristics rather than following a set formula.
A property sitting vacant costs money, so purchase one that will attract a long-term tenant. Being close to transport and shops is important, but also think about position. No one wants to live on a main road, opposite a train line, or noisy school oval. Location is just as important to renters as it is to homebuyers.
Renovated or original?
Renovated properties attract interest from emotive homebuyers and command a premium on price. If you’re looking for an investment, interior design shouldn’t be the primary focus. Remember the price you pay at the start will dictate the short term growth. An old or tired interior will give you ‘value add’ potential and with an inexpensive makeover you can still attract a good long-term tenant.
Don’t be afraid to seek advice
Buying property shouldn’t be stressful, however if you find yourself spending too many sleepless nights, don’t be afraid to seek expert advice. Choose a buyer advocate who specialises in purchasing property, avoiding those who also have a hand in selling property. (This includes the practice of vendor advocacy). Make sure they agree to a fixed fee in advance – not one that’s a percentage based on the amount you pay.
Finally, if you do go it alone be prepared for a lot of legwork! Attend as many open for inspections, auctions and local events as possible and ask lots of questions along the way! Property investment isn’t hard if you move forward armed with caution and education. Once you’ve made your first acquisition, you could be on your way to a multi-million dollar property portfolio.