A “looming shortfall” of medium-high density housing stock has been forecast by industry researcher CoreLogic, signalling a possible opportunity for investors.
More than a quarter of the national housing stock (25.9%) falls into the medium-high density bracket, and CoreLogic sees trouble ahead with the latest data showing the nation’s population increased 2.3% to $26.4 million in the 12 months ending March 31.
These apartments have a median value of $637,593, around two-thirds of city prices for detached houses.
Demand is outpacing their construction. The latest report by the National Housing Finance and Investment Corporation predicts an overall housing deficit of 175,000 in the next three years, and almost 60% of that will be seen in the units sector.
CoreLogic says apartments comprise almost a third of all housing stock (30.9%) in the capital cities. Such market dynamics could prove attractive to investors.
These tips may help if you are thinking of investing in an apartment for tenancy.
Long-term plan
Whether you plan to begin or grow your investment portfolio, ensure the next purchase meets your long-term goals. Are you prioritising rental income, value growth or a mixture of both? How confident are you that you could sell the property quickly if you need to cash out?
Location
Location should be at the top of every investor’s criteria. Only buy in areas where tenants want to live. As a rule, desirable areas will be near employment, schools, public transport, shopping, and recreational amenities.
Quality building
While there are always bargains, avoid purchasing in a building with problems. Down the track, this only attracts tenant complaints and can hit your maintenance budget severely.
Strata issues
You can ask for an independent report on the strata committee to gauge how well it works for owners in the building and its cash reserves. Avoid anywhere that might need major structural repairs, as you’ll have a share of the bill to fix them.
Safety factor
Buying in a rundown neighbourhood can be risky. While you might get a cheap unit, you may not easily find tenants or be able to sell it quickly. Choose an area with a low crime rate.
Research critical
Investigate local rental prices and vacancy rates. Identify an excellent local property management team and work with them to find the most suitable tenant.
Use experts
Smart investors will build a team of experts to help them make smart decisions. So, don’t purchase an investment unit without discussing it with your accountant or a licensed financial adviser.
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.