Suburbs with a high concentration of first home owners should generally be avoided by investors, claims market strategist and investor Helen Collier-Kogtevs.
The warning came after the release of a report by Gavin Hegney, executive chairman of Hegney Property Group in Western Australia, which identified suburbs with a large percentage of first home buyers.
According to Mr Hegney, the changing face of first home buyer suburbs is an interesting trend.
“Ten years ago, based on the number of first home owner grants issued, the popular suburbs comprised Canning Vale, Beechboro, Armadale, Bunbury, Port Kennedy, Geraldton, Albany, Kalgoorlie, Gosnells and Scarborough.
“Today, with median prices of around $400,000 and again based on the number of first home owners grant issued, the suburbs of Baldivis, Ellenbrook, Girrawheen, Byford, Canning Vale, Butler, Morley, Maylands and Balga feature as the chosen areas.”
But managing director of Real Wealth Australia, Helen Collier-Kogtevs, believes that there are less renters in these suburbs, which can lead to extended periods of vacancy.
“First time buyers generally target urban growth corridors, which is where a lot of first home buyers are buying. They’re within the affordability bracket of three to five hundred thousand dollars. Most people can afford that bracket, and when it comes to selling as part of an exit strategy you have a larger audience that can afford it.
“Not many people will go out that far to rent, they generally go there to buy because it’s affordable,” she told Smart Property Investment.
“You need talk to all property managers that exist in that suburb, to identify if there is a genuine shortage of rental properties. And if the property managers are all consistently saying ‘yes there is a shortage of rentals’ and then the investor has to find what type of property is in demand.
“There is no point buying a four bedroom home with a garage, if tenants want two bedroom apartments.
“As a general rule, out of the population of people living in that area, 30 per cent of them should be renting. Some of the urban growth corridors, only 15 per cent of the population are renters.”
But if there is already existing infrastructure, Ms Collier-Kogtevs believes it is much more attractive to renters that planned expansion.
“When something is planned, we could have a change of government, or a change of policy or even a change of mind and that project can be shelved in a heartbeat. If it’s already built, people are already utilizing that infrastructure.
“I would prefer that clients would stay away from areas where the projects are planned, and rather they went there after it’s built and pay 50 grand more, but at least that way their investment is more secure for the future.”