After a mixed bag for the property market in Australia in 2019, the race is on among buyers to secure the best property before prices start to charge upwards again. The question is how to avoid property FOMO in 2020 and grab a good investment at the right time, writes Prisca Edwards.
Buyer confidence has bounced back in Australia and all factors are pointing to it being a good time to buy, as all the drivers are there – buyer confidence, tight supply versus growing demand, the lowest interest rates in history, APRA loosening its restriction on lending and rising prices in key markets.
We have seen a strong spring season. CoreLogic figures showed apartment values had increased in value by 4.2 per cent in Sydney in the three months to December. Melbourne’s prestigious inner east had much faster rates of growth, of 8.3 per cent. Positive price growth had also returned in Brisbane, a trend that economists say is set to continue.
Prices are rising faster than ever - by about $3000 per week in September in Sydney and $2500 a week in Melbourne, according to Deloitte.
In addition, negative gearing is still in place, stamp duty seems to be staying put and we can still get favourable tax benefits compared to other countries – this all combines to boost the market.
These price gains are set to continue. Corelogic and Moody’s 2019 third quarter housing forecast report has predicted east coast apartment prices will climb in 2020: 7.9 per cent in Sydney and 4.8 per cent in Melbourne.
Sydney’s restricted supply pipeline will continue to put upward pressure on prices.
The Reserve Bank said in October that a shortfall in housing supply was likely, with a downturn in construction expected to constrict supply of new homes in 2020 but demand continuing to increase from population growth and investors coming back into the market.
This supply dynamic is set to continue: the NSW Department of Planning predicts Sydney will need 725,000 new homes over the next 20 years for another 1.74 million people. Melbourne population could pass 10.1 million by 2051. Given the speed of development approvals in NSW, developers will struggle to meet that demand.
What features should you look for in a good investment property?
Firstly, always location! A good developer will have done the due diligence to locate the best sites where there is demand for new homes and new infrastructure such as train stations, shopping centres, libraries and recreation centres that will add to the appeal of the property. Infinity by Crown Group, for example, is at Green Square, where there is AU$13 billion in Government and private infrastructure developments that are transforming the precinct.
A reputable developer and builder with a strong track record of high-quality developments over several decades is ideal; look for those who have many recognised projects with a great reputation and awards for design and construction. Properties with high quality design, construction, fixtures and finishes will be far more appealing to renters and owners and will enjoy better capital growth and good resale value.
In terms of potential for leasing and future capital growth, those properties that perform best over time tend to be close to a city centre or a hub where there is excellent transport, respected universities and schools, good medical facilities, convenient shopping centres, an airport and lifestyle attractions.
Australia is highly attractive to foreign buyers in particular for its quality higher education, with around 693,750 international students studying in Australia. Buying in university areas is a good idea because there is strong demand for property there from overseas buyers, therefore room for capital growth and good rental returns.
There is also a lot of infrastructure development underway in the key capital cities - $87 billion worth in Sydney including a new international airport and a metro rail system to Parramatta; $55 billion in Brisbane including the new Queens Wharf mega-tourism development; and $100 billion in Melbourne, Australia’s fastest growing capital city. So look out for growth areas.
Also, developments with inspiring, timeless architecture and shared facilities create a really attractive lifestyle and sense of community and connectivity that is increasingly sought after by buyers, who see its value in the long-term to add to the value of the property. Arc by Crown Group in Sydney’s heart has attracted international attention for its eye-catching design by Koichi Takada Architects. Such developments also offer a level of convenience at a reduced cost to residents who would otherwise have to travel to get to their gym, pool or local café every day. Their lifestyle is on their doorstep, with their neighbours. It adds great value.
Prisca Edwards is the group director of sales at Crown Group.