I went to a dinner party last week and thanks to my new role with Australian Property Investor, I was bombarded with questions from almost everyone at the table. There was very little pessimism about the market and no strong feeling that it still had some way to go before hitting the bottom of the cycle. The overwhelming sense was that people wanted to invest now.
BY SHANNON MOLLOY
Against all conventional investment wisdom, I toyed with the idea of selling one of my properties last year. I knew it wasn’t the best time, but I was curious so I listed the apartment anyway to see what sort of response I’d get. It wasn’t great. The sole offer I received was well below expectations – daylight robbery, in my obviously unbiased opinion.
The exercise illustrated the extent of the power shift that’s taken place in recent times. It was clear to me that, generally speaking, the places selling were being snapped up with a significant discount, and after an extended time on the market.
According to RP Data, average house prices fell in every capital city over the past 12 months – 6.1 per cent in Brisbane, 5.4 per cent in Melbourne and 3.2 per cent in Sydney. In those three markets, the average time it takes to sell a property is now at 129, 108 and 90 days respectively.
Given how long it’s taking for vendors to offload, and the reduction in average prices, it seems now is the time to buy.
Smart investors are taking their time, doing their homework, keeping their options open, examining the market very closely to sniff out good deals, and – most evidently – driving a hard bargain.
Where to buy obviously depends on factors within each individual market. Sniffing out the next hotspot before it starts to boil isn’t an exact science, but there are points to look out for. Helen Collier-Kogtevs of Real Wealth Australia says locations near major infrastructure projects are worth keeping an eye on.
“I like to research local councils to identify what projects are on the cards or have commenced,” she says. “A proactive council that’s family friendly and supports development helps to protect my investment. (Infrastructure projects) provide new jobs as well as increase population and demand for housing.”
I’ve been considering my own options and the possibility of buying another investment property while the going is good. Before I make a move, I’ve put together an investment checklist to assess each opportunity.
What’s my priority?
Am I looking for something with good cash flow prospects? The location should have strong demand for rentals and a relatively low supply of quality stock. It should also have drivers to be an ongoing rental hotspot, like nearby industry and employment hubs, desirability, educational institutions and so on. That way, it’ll be more likely to achieve rent increases and minimal gaps between tenants.
If a future capital gain is my focus, the areas to explore should have the right attributes for growth. Look for a suburb that’s well serviced by public transport, has good schools nearby, and is home to lifestyle amenities like restaurants, cafés, retail and parks. Consider properties that best meet future buyers’ expectations – a small unit in a mostly family oriented area might be a poor choice.
What’s my strategy?
Once I’ve figured out the priority, work out a strategy to back it up. For a cash flow property, should I consider some minor improvements to boost the rental price? For a place with capital gain prospects, what tools will I use to monitor its performance against wider market sentiment? For both options, what contingency do I have in place if things don’t go to plan?
What’s on the cards?
Are there plans for major infrastructure investment? Is there a new development going in that could improve the area? Does the local council have plans to beautify particular areas? Do any of the houses on ugly duckling streets look to be undergoing renovation?
Which sellers are most desperate?
Watch the market regularly and keep a log of properties that haven’t shifted in a while. If the seller is persisting, they could be especially keen to offload. There’s a fine line between realistic and ruthless – find it, and make an offer.
They could be open to anything, depending on how long they’ve been trying.
Does it stack up?
As always, investment opportunities should be based on personal circumstances. It’s important to assess each scenario. What can I realistically afford? Exactly how long is my long-term focus? What level of risk can I manage?
Shannon Molloy is the deputy editor of Australian Property Investor magazine, www.apimagazine.com.au