'Buy in gloom and not in boom' is one of the best pieces of advice about investing in the property market.
This is because successful property investors understand that timing is everything when buying real estate.
That is why astute property buyers purchase property at the bottom of the property cycle and then achieve strong capital growth during the recovery stage of the property cycle.
For example, property investors who purchased real estate in Sydney during 2005 to 2010 are classic examples of people who bought in gloom and then reaped the financial benefits when the property market surged over the boom years.
Currently, Perth stands out as a ‘gloom’ property which is near the bottom of its cycle and offers great opportunities for property investors.
If you read any articles about the Perth property market, they are all gloomy talking about falling property prices and rents.
As a result, there are now fewer buyers in the Perth market place and more properties available for sale. This means that properties are taking longer to sell and vendors are dropping their prices in an attempt to move them on.
However, the key to buying an investment property in any market is locating the areas that have growth drivers.
Property investors targeting the Perth market should buy in areas with strong demand from renters and focus on areas with forecasted growth in population, employment, industry and infrastructure.
Top tips for buying in the Perth market:
- Focus on demand: Population has always been a big driver in the demand for property and this in-turn underpins capital growth and rental returns. A good tip is to check the Department of Planning as well as local government population forecasts. The ABS also provides invaluable data with regard to population growth figures at a local level.
- Locate short supply: Check if there is an undersupply of new housing in high population growth areas. It is worthwhile to check with the local council to find out if there are more housing developments proposed for the area.
- Rental opportunities: Check with leasing agents what the demand is for rental properties in the local area you are targeting and what homes are in most demand i.e. one- or two-bedroom apartments? Ask agents how many days properties are vacant before tenants are found? Lower vacancy indicates short supply and potential for rental growth.
- Buy in prime lifestyle areas: Areas that are close to the river or beach tend to perform above the market average in Perth and there are some great buying opportunities in prime lifestyle suburbs currently in Perth. It is also worth remembering that the property market is fluid and with a downward pressure on property prices in the Perth market, make sure you don’t overpay for a property based on historic pricing.
- Buy new: New properties are easier to rent and will have fewer maintenance issues compared to older properties. They also have a higher level of tax depreciation benefits associated with them that can deliver property investors thousands of dollars in tax depreciation benefits every year.
About the Blogger
Paul Bennion is the managing director of DEPPRO tax depreciation specialists.
DEPPRO Pty Ltd is Australia’s leading property depreciation company, specialising solely in the preparation of tax depreciation reports for residential, commercial, industrial and leisure investment properties.