Investors will be heartened by the Reserve Bank of Australia’s recent decision to end its rate rise program and maintain the 4.65% cash rate.
It gives investors and landlords breathing space to consider the continuing strength of the property market and whether the expansion of their portfolios will reap greater rewards.
A recent report by CBRE Research should give investors cause for significant optimism.
Its projections across 2023-2028 show a growth of $120 in weekly rent, which is 26% above the current average. It says some suburbs in the state capitals will see rent values rise by more than 30% in the next four years.
The continuing rise in Australia’s population will power this growth, projected to increase by almost four million by the end of 2028. At the end of January, the nation’s population reached 27 million.
CBRE says the nation will create an additional 2.6 million jobs by the end of 2028, adding $850 billion to the gross domestic product (GDP).
It warned the country must create at least 75,000 dwellings each year to prevent the current rental crisis from worsening. Sydney needed 33,000 units but would only see a supply of 14,000 annually until the end of 2028. Brisbane needed 16,500 units but would likely get 6,500.
The story is similar in every State capital.
CBRE forecasts a decline in capital city vacancy rates from 1.8% in 2023 to 0.8% by 2028.
This data may be helpful if you are considering becoming an investor. These tips may also be useful.
Your goals
A defined strategy is essential for success. Are you a long-term investor or someone who will buy and flip properties when you have the desired capital gain? Your approach will inform your financial needs.
Money question
Always set a budget that includes the purchase price, transaction costs, ongoing maintenance and potential vacancy periods. Discuss your potential purchase with your financial adviser.
Risk Management
Most successful portfolios feature a diverse range of properties to spread the risk. Try to avoid buying all your properties in one style in one area. If there is a local downturn, the ramifications can be significant.
Stay Informed
Successful investors do not “set and forget”. Stay informed about market changes and be prepared to adapt your strategy. Don’t be afraid to buy and sell assets to stay ahead of the curve and grow profits.
Buying basics
Always thoroughly research an area where you wish to purchase. Tenants are attracted to locations that offer employment opportunities, good transportation, hospitals and schools and amenities such as cafes and restaurants.
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.