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The head of research at Propertyology has revealed the top five opportunities property investors should be looking out for in the current market.
Speaking on a recent episode of The Smart Property Investment Show, Simon Pressley, head of research at Propertyology, shared what investors ought to know about investing in Australia’s current property market.
The top five opportunities to capitalise on, he says, are:
1. Low interest rates
“We’re experiencing the lowest interest rates in any living Australian’s lifetime. This is accessible to us all right now. And there are plenty of people that are saying, ‘They might go up again’. When we buy property, the not so sexy bit is we buy the debt first. And if we can’t buy the debt, we can’t buy the asset, yeah? So, think of it that way. It’s the cheapest time that you will have ever had in your life to do something proactive for your future. Take advantage of it,” Mr Pressley said.
2. High yields
“The next one is related to the first one. High yields, they’re not any higher now than what they’ve really ever been, but Australia has always been littered with locations with a 5 per cent to 5.5 per cent rental yield. And we’re not talking [about] really tiny towns and that’s why it’s only a 5 per cent yield. We’re talking about locations of substance, locations with diverse economies,” Mr Pressley said.
“In a lot of locations, those economies have a really strong exciting outlook, so 5 per cent yield. And if you’ve got an investment property with a mortgage of say 4 per cent, even if, for those investors who are getting into the market, by tapping into equity to raise their deposit so that they’re essentially 100 per cent geared (plenty of investors do that), that only leaves a couple of thousand dollars of your own money that you need to tip in to cover things like council rates and property management fees and that sort of stuff.
“So, it’s directly related to the interest rate component. Your profit and loss is dictated... The two main things is your rental income, which is the yield, and the biggest expense will be your debt.”
3. Vacancy rates
“The capital city vacancy rates that are published every month or whatever they are, they’re very misleading. A vacancy rate of Sydney, Melbourne, Brisbane or whatever, it doesn’t mean the whole city’s like that. When you get outside the capital city, those vacancy rates, because the population isn’t five million or something like that, the number can be more realistic,” he said.
“Large parts of non-capital city Australia have vacancy rates somewhere between 2 per cent and believe it or not 0.5 per cent. That’s low. And most of them are trending lower. So, while our bigger cities are being smashed with all-time record supply the last couple of years, large parts of regional Australia have not had that.”
4. Median house price guides
“[If you have] 450k, which I guess if you live in Canberra, Sydney, or Melbourne, you think, ‘What can you get for that?’ You know? Dog box. Outside of those three really expensive cities, Wollongong is expensive, Newcastle’s expensive, but Australia’s a big country,” Mr Pressley said.
“Last time we were [speaking on The Smart Property Investment Show], we were talking about how there’s 185 locations all over Australia with a population of 10,000 people or more. And 111 of those have seen their median house price triple in 20 years.
“So, there are lots and lots of opportunities. Most of those 185 locations have a median house price south of 450k.”
5. Economic development
“So, this is the leading indicator and in Propertyology, it’s always the most valuable gold in terms of information for picking locations. No particular order here, but industries that have a strong outlook are natural resources, education, agriculture, tourism, and renewable energy,” Mr Pressley said.
Tomorrow Smart Property Investment will reveal the top five things investors should be cautious of, featuring expert commentary from Mr Pressley.