How suburbs transition from owner-occupier to investor markets
In the same way that the Mount Druitt property market in NSW transitioned from an owner-occupier to an investor market six years ago, Queensland’s Kippa-Ring is now starting to see its predominantly owner-occupied market slowly turn into a market for investors.
The infrastructure growth in Kippa-Ring has made it the commercial, retail, and financial centre of the Redcliffe region—an ideal area for wealth-creation.
According to Pure Property Investment’s Paul Glossop: “You've got to the point now where you've seen who've got a commuter belt, [and] they're also going to see some demand come [from] Petrie University when that goes in in about three or four years’ time.”
Aside from the abundance of infrastructures, there are also other factors that causing the shift, the property professional said. For example, interstate migration and job growth in the last six months has seen growth in investor activity across Brisbane and the whole of the southeast Queensland region.
In fact, even if price growth has been average, Brisbane has remained on investors’ radar for the best part of the past five to seven years, Mr Glossop said. Moreover, according to him, the cooling of two lead markets is also playing a role.
“But, I think, the population growth, infrastructure, as well as the jobs creation now starts to become a bit more of a crescendo on the back of two markets … Sydney and Melbourne, having a very good, long, and strong run but [are] now starting to tail off,” he said.
Wins for investors
Transitioning property markets offers opportunities to investors seeking affordability and good cash flow.
Sydney and Melbourne have experienced minimal capital growth in the recent years and the cash flow coming in is only around 3 per cent to 3.5 per cent growth in rental yield, according to Mr Glossop. As a result, those who want to continue growing their portfolios are shifting their attention from these two popular markets to others where they can buy properties for low prices and still enjoy the same good community spirit they would have done in either Sydney or Melbourne.
However, an increase in investor activity in a transitioning area can impact its rental potential.
For example, Kippa-Ring rental vacancy rates have started to increase following the rise in investor demand, Mr Glossop said.
He explained: “Let's say there are 1,000 properties for sale ... and 70 per cent of those were owner-occupied, so 30 per cent were investor properties. If 20 per cent of those … sell to investors, you will all of a sudden [have] 50 per cent [new] investor stock without building a single property—there's 200 extra properties on the rental market as that transition happens.”
Given this, he suggests factoring in one or two extra weeks of vacancy a year. He also encourages doing thorough research and, where appropriate, seeking the help of reliable professionals.
Agents often just want to sell what they have to sell as fast as they could, he said, so it takes due diligence to know whether you’re buying a worthwhile investment.
“Do due diligence, talk to the council, talk to anyone else who's going to be surrounded in that … [Don’t get agents’] word for it because, ultimately, they're going to want to sell you what they've got to sell,” Mr Glossop concluded.
Tune in to Paul Glossop’s Q&A episode on The Smart Property Investment Show to know more about the Victorian State government changes to subdivisions and the requirement for a garden space, and how they think it will impact affordability and cash flow in the future.
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