Despite the softening of some of the major property markets in Australia, experts believe that the capital city markets continue to offer wealth-creation opportunities. How can investors capitalise in today’s changing market?
In order to identify the right properties to buy at any point in the market cycle, Keshab Chartered Accountants’ Munzurul Khan strongly advised doing good research and due diligence by identifying goals, capabilities and limitations, both personal and financial.
“Sit down with and assess your own goals. Go through what I like to call fact-finding. Where am I in terms of cash flow? In terms of professional advisory? In terms of personal circumstance? Once we know where we are, we can ask ourselves, ‘What can I afford?’”
“Knowing yourself is step one, whether it is with a professional or by yourself,” Mr Khan highlighted.
Then, investors can move on to establishing an investment budget and planning the acquisition of finance.
Mr Khan explained: “We go to the bank and say, ‘With my budget, what can I do?’ I would love to buy in different areas, but if I can't get the funding, I can’t buy it.”
“Let’s just say my budget is about $500,000 grand at about 4.5 per cent return. Which areas can I buy in? I go back to step one and look at my priorities and timeline, and, for instance, I want growth in 15 years, so we ask ourselves, ‘What are the suburbs that are likely to see the growth within 15 years.”
“These whole journey of ‘Where do I buy? How do I buy?’, there is no one specific answer to those, but there are a lot of signs and a lot of calculations behind it.”
Finally, he encouraged investors to avoid analysis paralysis, or overthinking every decision they will make.
If the decision to be made is backed by thorough research and guidance from professionals, where appropriate, the best thing to do is jump on the opportunity before it’s gone, according to the accountant.
“Property investors, in one way, are entrepreneurs, and as an entrepreneur… you always go with the science, but at the end of the day, you also make a decision with the heart.”
While huge parts of the Sydney property market is currently at a softening phase, Mr Khan said that there are opportunities that remain in the capital city, particularly in areas with strong population growth and new infrastructure line-up.
, Eagleville and other Western suburbs represent good value at the moment due to the relative affordability of properties and the abundance of potential to add value through development, according to the accountant.
“These suburbs have recently become resigned to some extent. By buying a smaller block of land, you can build a duplex, or buy a corner block and you can perhaps do a little bit more.”
Still, despite the wealth-creation potential in both Sydney and Melbourne, Mr Khan advised investors to be ‘extraordinarily careful’ when buying properties at this point in the market cycle. After all, both capital cities have yet to fully recover from their months-long declines.
Investing in Hobart could come with risks as well since the population growth across the capital city remains weak.
“There is only so much demand that can come from a 500,000-population. Yes, it has grown very well in the last few years, but will it continue to do so in the long-term? That’s the important question,” Mr Khan highlighted.
Adelaide and , too, have yet to be stable enough to provide significant returns to investors, according to him.
On the other hand, Brisbane, specifically Moreton Bay, could be offering a more significant value proposition considering the new infrastructure set to be built in and around the area, as well as the possibility of further rezoning in the near future.
Moreton Bay has been declared as a priority development area by the state government as it continues to secure strong housing demand through consistent population growth and interstate migration. As a result, the area has recently became one of the highest-growing shires across Australia.
Among the major projects that contribute to the high level of infrastructure spending in the region are the establishment of the new campus of the University ofCoast and the development of The Mill at Moreton Bay—both of which are expected to contribute significantly to the region’s jobs growth.
“In summary: Where would I buy? I would say Brisbane is still my pick at this stage. At the same time, there are selected buys in Sydney as its coming back,” Mr Khan concluded.