As rising property values across Australia stabilise – for the moment at least – investors have a great opportunity to expand their portfolios before interest rate cuts finally arrive and buyers return in force.
While values may currently be favourable, investors should be aware that the stellar growth in rental income since the pandemic is losing steam.
Recent market analysis by industry researcher PropTrack shows that the affordable end of the rental market still offers great opportunities for landlords and investors.
A study of advertised rents over the past five years shows how much the rental picture has changed, potentially informing your investment strategy.
Since 2019, the median weekly rent advertised has jumped 48%, from $420 to $620.
The cheapest 10% of the rental market has seen rents increase 54%, from $280 to $430. The luxury end has experienced a 40% increase.
Swaying this figure is the fact that most of the cheapest rents in 2019 were in Perth, Adelaide, Brisbane and regional areas. Of course, we’ve seen a huge change in market sentiment for those three state capitals.
They’ve been our hottest real estate markets for the past 18 months, and while prices have skyrocketed so have rents.
Today, the city with the most affordable rents is Melbourne, which has experienced a strong supply of apartments.
Melbourne has snared 29% of properties with the most affordable rent category (lowest 10% of the available rental market), according to PropTrack.
To underline the dramatic change in the rental scene, Sydney has more properties with affordable rents than Adelaide, Perth, and the Brisbane area, which includes the Sunshine Coast and Gold Coast.
For investors seeking to begin a portfolio of properties, it’s important to understand how markets can change quickly, affecting your income and investment.
Here are a few quick tips for would-be investors:
Diversify: As the PropTrack data shows, you should spread your risk. Investing in a range of State capital cities is the smart play. Each one’s fortunes wax and wane at different times. Right now, Melbourne is struggling, but it won’t always be like that. And Perth is only ever super-hot during a resources boom.
Start slowly: Focus on learning the ropes and gaining experience before expanding your portfolio. So, start with one affordable property.
Investment objectives: What do you hope to achieve with your property portfolio? Are you primarily seeking capital growth, rental income, or a combination of both? Are you in for the long haul or looking for quicker returns? These are essential questions before you set out. And, understand your risk tolerance.
It’s Teamwork: Build a strong financial team around you. Work with a financial advisor and mortgage broker who understand your objectives and are invested in your success. A good solicitor and conveyancer are invaluable, too.
Professional Touch: If you lack the time or expertise to manage the property yourself, hiring a property manager can save you the hassle and ensure your investment pays dividends.
Remember: Property investment involves inherent risks. Market fluctuations, unexpected expenses, and changes in tenancy laws can impact your returns. It’s crucial to do your due diligence, seek professional advice when needed, and make informed decisions based on your individual circumstances and goals.
*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.