After a profit-taking exodus during Covid, property investors are back in the market, according to the latest industry data.
The proportion of investors is returning to historical averages as median national rents increase 10% a year and property values turn the corner with five successive months of growth.
Australia’s property market experiences an average 25% participation rate by landlords and investors.
For those who mitigate investment risk by buying in different markets, the profile is interesting. Industry researcher CoreLogic reports 38% of all new mortgage lending in NSW is coming from landlords. Tasmania (24.5%) and Western Australia (28%) are the next hottest markets.
Separate CoreLogic data suggests many investors are putting existing properties on the market.
Some 32.7% of all properties advertised for sale currently are investment properties. Together with increased mortgage costs, state land tax reforms in Queensland and Victoria have caused concern recently.
However, five consecutive months of property value growth signals significant capital growth is possible during the next five years, and that’s a tempting lure for many investors.
If you are thinking of property investment, these key considerations may help you before making a decision.
Seek Advice
Consult your accountant or a licensed financial adviser who has experience in real estate investments. They will help you calculate your “yield”: a bottom line that indicates if a property will be profitable.
Location
Purchase your investment property in an area that tenants find attractive. They want easy access to amenities, transportation, schools and job opportunities.
Homework
Research your target areas to understand price trends, capital growth and likely rental incomes. Avoid suburbs where lots of apartments are being built. Nothing brings down rents faster than a glut of units hitting the market at once.
Quality
Avoid properties that may require extensive maintenance. You can never “set and forget” any property, but you don’t want one that will continually need attention.
Service
Avoid the headache of tenant management by employing a professional property management company. They can set a market-appropriate rent and select the tenant. The cost will be a percentage of your rental income.
Exit
Be clear on whether your investment is for the medium or long-term. Talk to your advisers about your financial goals. Are you looking for steady rental income, long-term appreciation or a mix of both? Your goals will influence the type of property in which you should invest.
NOTE: The information in this article is general in nature and provided as a market overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.