Real estate investors are starting to make their presence felt in the real estate business again, but they should try to fine-tune their strategies to make the most of current market conditions, experts say.
The latest figures from the Australian Bureau of Statistics (ABS) show continued upward movement by investors.
Since the recent low of 22.89% in November 2020, real estate investors represented 29.11% of new home loan commitments in May 2021.
REA Group Senior Economist Eleanor Creagh said increased investor activity was apparent in all states, even in Victoria, where investor lending has declined slightly in recent months.
"The combination of low borrowing costs, continued capital growth, and attractive rental yields is a clear incentive for investors to return to the market," Ms. Creagh said.
Top places for investors
Data from the REA Group showed that South East Queensland is currently number one for investors this year.
Greater Brisbane, Darwin and the Queensland region also saw a sharp year-over-year increase in investor inquiries to realestate.com.au.
"Looking specifically at the requests for units, it appears that investors have indeed lifted any reservations they might have had regarding a perceived oversupply in Brisbane," Ms Creagh said.
“When it comes to investors learning about homes, the growth has been both in Brisbane and the Queensland coastal markets. "
The areas of Logan-Beaudesert, Moreton Bay South and Ipswich SA4 are the most popular among investors.
Darwin and regional South Australia are also highly sought after by promising investors.
Surprisingly, inquiries about the Melbourne market are also increasing.
It appears that the relative affordability and tight rental markets in these regions encourage investors to explore the opportunities in these markets.
Investors are also thinking about where future buyers and tenants would like to live.
Ms Creagh said the exodus of people from the larger markets of New South Wales and Victoria would likely benefit smaller states like Queensland.
"A lot of people have not only chosen to escape lockdowns, but are also looking for a relatively affordable price in Queensland," she said.
“More sun, less traffic, and the potential for expansion were all cited as driving the northward flows. "
How much are investors willing to spend
In terms of median prices, the sweet spot for investors is $ 650,000 for homes and $ 495,000 for units.
These average median prices have been increasing steadily since 2019.
Since the start of the pandemic, the Northern Territory has seen the biggest rise in investor prices.
"It's no surprise that new investor loans at NT have more than doubled, with investors responding to both high rental yields and price growth," Ms. Creagh said.
Factors Investors Should Keep in Mind
Metropole Properties Brisbane Director Brett Warren said investors often overlook some of the most basic fundamentals when trying to break into the real estate investing scene.
"It's interesting that these are exactly the same fundamentals that most investors would look for when buying a home, but when investing in one way or the other. another, they do things differently, "Mr. Warren said.
"If they had taken a similar approach to how they bought their house, they would probably be in a better financial situation and would probably have accumulated more property and therefore more wealth." "
1. Get the right location
Mr Warren said finding the right location is crucial as this will do 80% of the heavy lifting when investing in real estate.
"I always advocate buying from places where demand far exceeds supply," he said.
“This is why we favor the peripheral to intermediate suburbs of Sydney, Melbourne and Brisbane. "
However, it is just as important to consider the type of property. These downtown locations have an oversupply of apartments as of late.
2. Understanding the land / asset ratio
When investing in real estate, Mr. Warren said it was essential to always consider the value of the land.
A rule of thumb to follow is to ensure that the value of the land is more than 50% of the purchase price of the property.
"If it was a house and land in a remote suburb, you will very often find that the value of the house exceeds the value of the land, which means most of your assets are depreciating or losing value, ”Warren said.
The same principle can be applied when investing in shares.
"You can imagine that a boutique complex of six or 12 apartments will have a greater property value attributable to each unit than a complex of 300," he said.
3. In Search of the 'Cherry' on the Investment Cake
While 80% of the success of an investment property relies on location, Mr Warren said there is still a need to consider the remaining 20% ??that would serve as 'icing' .
This "icing" includes the various institutions and points of interest near the property, such as schools, hospitals, and lifestyle neighborhoods. Public transportation, amenities, and infrastructure are also included in this.
"As an investor, act like a home buyer and don't break the rules," he said.
"I often hear investors say 'I'm investing in a suburb because there's a new university, a new train line, or a new hospital" – these things are one-off . does not encompass the vast majority. "
4. Have a list of deal-breakers
Another factor that investors overlook is determining what they don't want in a property.
Mr. Warren stated that home buyers often have a list of things they don't want their future home to have.
"You want to have as many people as possible to buy or rent your property, that's another way of saying high demand," he said.
"If you start buying on main roads or flooded areas you are excluding a lot of buyers or tenants and won't get the above average rates of return to build your wealth faster." "
