Investing in expensive suburbs is infeasible for many Australians, as incurring debt is a dreadful notion while credit remains inaccessible to the masses. Here are some reasons why investing in desirable – therefore, unaffordable – suburbs might be a wise investment strategy.
“Blue-chip” suburbs are often residential hotspots, drawing in “young professionals that earn $100,000 or $200,000”, particularly in desirable urban areas abounding coastlines, cafe hubs or natural reserves, property investor Chris Gray said the Smart Property Investment Show
Mr Gray added that it is wise to avoid investing in property in the CBD because “there’s no limit of supply”.
“You can keep building all these big towers and most Australians don’t want to live in a tower, so it’s really going that five to ten, maybe fifteen … [kilometers] from the CBD, [with] three story height limit[s], so there’s no more supply of property,” he said
Further, renting to tenants with “good jobs” means they will always pay their dues on time “because they don’t want the boss finding out that they haven't paid the rent,” according to Mr Gray.
The Sydney-based property investor claimed that investing in properties in desirable residential areas that sit on the expensive end of the property market spectrum means “you get a steady market” in the long term.
“[This kind of] property is never cheap… [and] it’s going to be negative geared, assuming you’re 80 per cent geared, but typically that property doesn’t suddenly drop 10 per cent or 20 per cent,” Mr Gray said.
“Ideally, I’m just after that [value] doubling every seven, ten, twelve years. Whatever it does, I don’t really care, but I just think in 10 or 20 years, is it going to be worth more money?
Mr Gray claimed that “95 per cent of Australians probably can’t afford” to invest in blue-chip property markets.
However, there is still going to be “plenty of people” who are interested in acquiring such properties, so competition can still be tight.
“I’ve been speaking down in Adelaide before and I talk about buying a two-bed or a one-bedder in Bondi for $1 million and they said, ‘Chris, we spent $400,000 on a house, why are we going to go and spend $1 million on a 70 square meter unit?’ and I get that,” Mr Gray said.
The property investor admitted that his strategy is not the be-all and end-all of property investment, nor is it the key to success for everybody that follows suit.
“There’s a million strategies and there's pros and cons of everything,” he said.
“There’s nothing wrong with buying in regional Australia and there’s people that will be making 20 per cent growth at the moment. [Meanwhile] our markets are flat or down a few percent.”
Mr Gray added that there are several other places in Australia that “would be making a fortune”.
“So, the difference is ... if you live in those areas or you understand them, be an expert in that area,” he concluded.