Be savvy about property in 2012
With interest rates now lower than they were 12 months ago, property prices having come off and rental demand still high, the prospects for financially prepared investors in the coming year remain quite favourable, writes Lisa Montgomery
There were some noticeable shifts in trends in 2011 across various property markets, and it’s worth knowing what those changes are so you can factor that information into your research and plans.
In terms of major metropolitan cities, although prices have all generally cooled, some markets have fared better than others in terms of holding their value.
However, it’s not enough now just to know what price you may be able to purchase for; just as important, you need to know what sort of price growth you might expect in the future – and this is where your own research is the key.
Based on forecasts in the most recent QBE LMI Australian Housing Outlook Report, it’s expected that the cities of Sydney and Perth are likely to experience the most solid price growth in the next three years.
They are set to be closely followed by Brisbane and Darwin, which are set for reasonable growth; while Adelaide, Hobart and Canberra will be more moderate and Melbourne will still experience some growth, but not at the same level as other state capitals.
That doesn’t mean investors should exclude any particular cities from their plans, but simply that when you’re looking at property as a long term investment, some markets may take longer than others to reach the same growth level.
If you are considering purchasing something in the city, you should investigate closely areas on the fringe of the CBD and other population hubs where infrastructure is well developed and there is evidence of ongoing government investment.
This is more likely to ensure it will continue to be attractive to the rental market as well as increase in value.
But if you can’t afford a property in the city, you should still consider regional property instead, as this market is still performing extremely well – and that isn’t set to change anytime soon.
As always, make sure you research where you plan to purchase, taking into account a whole range of factors so you can be confident the area will continue to be economically viable.
Serious investors should be looking particularly at areas underpinned by a diverse range of industries where there is evidence of an ongoing commitment to improving the infrastructure.
Closely scrutinise key indicators such as the area’s population growth, the influence of various industries in the region, the economic drivers for the area and the part that local government plays in infrastructure as well as the reasons in general that people want to live there.
There is a plethora of information available online to assist you.
In terms of whether there is more demand for units or houses, rental yields for both are still strong, with greater demand for units driving those yields up further in relative terms. So, whether you choose to purchase a house or a unit will really depend on your budget and its rental appeal.
While units are generally cheaper, you still need to be very choosy about where you buy, aiming for areas where the property will continue to be sought after by renters who are largely representative of the area’s demographics.
In terms of what investors can expect from loan packages, the nature of the competitive lending landscape will ensure great deals continue to be offered.
Most investors will inevitably stick to the large range of standard variable loans, which offer low rates and flexibility. While rates are historically low, however, this could change next year, so make sure you consider packages that not only can offer you flexible features but that are also backed by decent service when you need it.
Interest only loans will still have their place with investors who wish to use the tax benefits and rely on capital appreciation of the property to build up equity. But while rates are still low, there is a timely opportunity to pay down principal and build valuable equity in your property.
Creating equity in this way, rather than waiting for any natural capital gain, will always be the preferred option and most investors should be thinking of taking advantage of it.
So, keep reading, watching and waiting so you’re prepared for the time when the planets align and opportunity knocks loudly on your door. This year be that perfect time.
Lisa Montgomery is the CEO of Resi Mortgage Corp
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