16 November 2019
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Where returning investors should buy their next property

John McGrath
17 September 2019

We are seeing the first signs of investors returning to the property market after a bit of a hiatus due to credit restrictions, higher interest rates on interest-only loans and rental yields getting too low in Sydney and Melbourne as prices went higher through to 2017.

Latest figures from the Australian Bureau of Statistics show the value of new loans to investors (excluding refinancing) across Australia jumped by 4.7% in July – the highest monthly gain since September 2016.

On the east side of the country, Canberra led the investor charge with a 22% spike in the value of loans from June to July, followed by Queensland at 8.1%, Victoria at 5.7% and NSW at 2.0%.

Investment activity is still well down on previous years, but it looks like some people are re-engaging with property now that prices are lower in many metro and regional markets.

Also contributing would be the two interest rate cuts, the easing in lending criteria and a lack of appealing alternative investment options due to low deposit rates and sharemarket volatility.

My best piece of advice for property investors is to buy quality and focus on location and aspect.

Go for a quality property in a great street, in a desirable neighbourhood, with plenty of amenities such as cafes, shops and public transport. These properties might cost a bit more, but you’ll get better capital gains.

I also recommend drive-by investing – purchasing in a suburb close enough to home or work so you can get to your property easily.

In terms of locations, I think a good strategy is buying close to new infrastructure. There is so much building going on and this is creating opportunities for investors to capitalise, especially in areas where prices have fallen during the downturn. Here are some examples on Australia’s east side.

Canberra – Canberra Metro

Infrastructure: Light rail

Opened: April 2019

Impact: The 13-station light rail line connects the city with the inner north and outer north Gungahlin region. Services run every 6 minutes in peak hour. The suburbs with stations include Braddon, Turner, Dickson, Lyneham, Downer, Watson, Harrison, Franklin and Gungahlin.

Opportunity: Great time to buy along the line, targeting properties within a 10-minute walk of stations. Median prices in Franklin, which has three stations, peaked in 2017 at $748,500 for houses and in 2015 at $409,500 for apartments, according to Hometrack Australia data. The medians today are $683,500 and $367,250 respectively, according to CoreLogic.

Closer to the city in Lyneham, the median price has dipped from $860,000 in 2017 to $756,000 today for houses and from $456,500 in 2015 to $395,000 today for apartments.

Prediction: CoreLogic-Moody’s Analytics predicts 9.2% growth for houses and 8.2% for apartments across Canberra over CY20 and CY21.

Brisbane – Cross River Rail

Infrastructure: Heavy train line

Starting: End of 2019, with the aim of opening 2024 

Impact: Stretching from Dutton Park to Bowen Hills, the 10.2km line will provide a second river crossing so more trains can run. It will include four new stations and revitalised precincts at Boggo Road, Woolloongabba, Albert Street and Roma Street, with upgrades to existing stations at Dutton Park, Exhibition, Salisbury, Rocklea, Moorooka, Yeerongpilly, Yeronga and Fairfield.

Opportunity: We tend to see a lift in property values when projects are announced, commenced and completed. Using Woolloongabba as a case study, the median house price sat around $770,000 from 2015 to 2018 but is now starting to grow. It’s $822,000 today, up 7.9% over FY19. The median apartment price has been drifting down since 2015 from $526,500 to $405,000 today.

Prediction: CoreLogic-Moody’s Analytics predicts 1.2% growth in house prices and 9.1% growth for apartments over CY20 and CY21 in Brisbane-South, which incorporates Woolloongabba, Fairfield, Dutton Park and Yeronga.

Sydney – Sydney Metro North West

Infrastructure: Heavy train line

Opened: July 2019

Impact: A game changer for the Hills District, where residents have had to endure long trips on packed buses to the CBD for many years

Opportunity: Fantastic time to buy in suburbs along the line within a 10-minute walk of stations. Hills prices dipped 10-15% in line with Sydney throughout the downturn. For example, Castle Hill’s median house price in 2017 was $1,620,000 and today it is $1,347,500. The median apartment price in 2017 was $890,000 and today it is $815,000. 

Prediction: CoreLogic-Moody’s Analytics predicts 15.3% house price growth in Baulkham Hills/Hawkesbury, which encompasses the Hills; and 9.5% for apartments over CY20 and CY21. 

Melbourne – North East Link

Infrastructure: Freeway

Starting: 2020, with the aim of opening 2027 

Impact: Connecting the M80 with an upgraded Eastern Freeway, this $15.8 billion road will cut travel times by up to 35 minutes to Melbourne’s rapidly growing northern suburbs. The commute by public transport will improve with the city’s first dedicated busway, with express lanes along the Eastern Freeway from Doncaster to the city.

Opportunity: Suburbs along the new road’s corridor should receive a boost. Take Greensborough, which will see greatly improved traffic flow with a new interchange at Grimshaw Street as part of the project. The median house price peaked at $830,000 in 2017 and today it sits at $755,000. The median apartment price was $633,750 in 2018 and it is now $570,000.

Prediction: CoreLogic-Moody’s Analytics predicts very strong growth of 18% in house prices in the North East, which includes Greensborough; and 5.1% growth for apartments over CY20 and CY21.

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