Top ten property trends for your portfolio
With the market changing, we can already see the trends lining up. We’ll review all the forecasts soon, but for those of you who plan your purchases during the summer break see below for the top ten influences we believe will impact the market in the coming months.
We are definitely experiencing market relaxation in the sizzling hot markets of Sydney and Melbourne and have been experiencing this for at least the past 12 months. Remember though, every suburb / property type is a market in itself so there are plenty of Sydney + Melbourne markets on the way up . .but the overarching sizzle has settled. Personally, I really hope this continues as the pricing pace was completely unhealthy.
Give me a buyers market any day and I’m in heaven. Remember the good old days when you could negotiate prices down more often than not? But that feels a bit predatory, so I would just settle for a flat market. Flat markets are predictable and absolutely wonderful as the backdrop for our next trend – renovations.
Will the renovation option ever get old? I can’t ever see this happening, so we will just see this move in waves as suburbs age. As a buyers’ advocate I definitely see two distinct groups – one who is repelled by even the smallest amount of work, and one that can’t wait to get their hands on a renovation project.
The Housing Industry Association economists have done some work on market performance and point to suburbs that are 30 to 35 years of age as the sweet spot for renovations with good uplift. Opportunities are Australia-wide and include Sydney and Melbourne. With sensibility coming back into the market, the renovator group should be able to buy and sell, and move onto their next project without being priced out of their next purchase.
The ‘upgrader’ group (ready to move from their first or second property) has been held back over the past five years as they watched from the sidelines while prices smashed records. Sure, they made significant gains, but they’re currently growing out of / bored with their existing properties and looking to utilize some of their property profits to change locations. With lending restrictions on investment properties and attractive rates for home loans, the upgraders will finally get moving again . . .literally. Renovators – please take note . . .here’s your market. This will impact price points anywhere from $750,000 and generally up to $2,000,000 range, Australia-wide. Some clients in this band are selling their principal residence and moving to more ‘cost effective’ locations, then purchasing ‘a few’ properties instead of just one – but then they become ‘changers’ not upgraders.
Look to the areas that didn’t have double digit price increases over the past two years as these will now receive attention. The general buy-in price for many first time investors is the $400,000 to $500,000 price range, so well located properties in this price band will continue to be popular. This will mean Brisbane should finally get more action (we’re already seeing this as days on market for this price point for Brisbane suburbs is already dropping). Also, Bathurst, the Central Coast of NSW, Ballarat, Geelong (note that Newcastle and Wollongong are already closer to $550,000+ range) as well as Hobart and Canberra. Caution should be used with Hobart as they’re currently experiencing some good results bit this will be a very limited run – Hobart should be thought of in the same category as big regional towns (not regional cities).
Canberra is another amber light – firstly, it’s just like a mining town as they have one major employer . . the government. Secondly, we’re not fans because it’s leasehold land – not freehold like most other areas of the country so the goal of ‘eternal’ income isn’t as assured. And no, I didn’t forget Adelaide. It’s just not high on my list, unless you want to buy a great vineyard. We’re keeping a close eye on Perth suburbs though. Direct flights to London commenced in March 2018. Two of my favourite places linked like that will send me over the moon. Couple this with the opportunity to take a trip on the Dreamliner and it will be easy to entice my husband to pop over to Perth and pick up some property on the way.
Follow the good projects. This is another eternal trend / influencer (as per renovations above). Of course, timing is everything as different property will perform at different stages of infrastructure completion. Rail projects are quite good to track (pun intended) but be really careful of useless spur lines that finish in greenfield areas (hello Springfield, Qld). See our summary of key infrastructure projects here.
For the focused property investor who actually likes to receive immediate positive returns on their investment, we are seeing an increased interest in commercial property. This trend is underpinned by a combination of other trends – an increase in small businesses opening, a trail after the increased residential activity, and new suburbs / areas impacted by Federal and State infrastructure spending. This focus has even reached Parramatta, where a major developer – Lang Walker – switched a pre-approved residential tower to be used for commercial. Sure . .an extreme example, but it’s definitely a trend and an opportunity.
Back to cash
The craze of chasing capital growth despite appalling returns is finally slowing, although we should always be looking for good capital growth accompanied by good rental yield. The new yield race is one of the drivers to Hobart’s recent performance, however there’s plenty of better options for good yield where capital growth won’t quickly top out. The really nice twist involves clever purchasing (properties that need a little work) along with clever use such as Airbnb, adding a granny flat, or our next trend . .small lot development.
Small lot developments
Very hot in 2018, and gathering further pace for 2019. With councils re-zoning to unlock supply and keep pace with population increases, all property owners should be checking their zoning regulations. Yes, even those of you who have units – particularly low rise constructions on large blocks of land. If you’ve checked your properties and you’re not sure you can do anything, give us a call as we can review your property and provide an outline of what can (or can’t) be achieved. Definitely any future purchases should include consideration of local zoning requirements even if you’re not planning to take any action in the short term.
This is the new term for the old ‘boarding house’ approach. There’s considerable variety in how this strategy can play out depending on the property, your budget and your goals. This includes converting an existing house to facilitate shared kitchens and other living areas, through to true ‘apartments’ ranging in size from 12 to 25 square metres. Note the rents include all services such as electricity and water, appliances and often crockery (plates etc), however the returns can be extremely good. The added benefit is providing affordable housing to those who will really appreciate access to well located affordable rent. Like all building forms, each council will have standards that need to be observed and there is specific legislation for owners to know and understand. The one consideration is that currently in most situations, the micros cannot be split up and sold separately like a block of town houses, but this may change in the future.
With more Australians buying investment property and with the banks tightening lending practices, the importance of building a balanced portfolio is emerging as a significant issue. Balanced portfolios allow you to continue to buy when the time is right, and hold on to your property when the market tightens. The best portfolios contain a diverse mix of property types and should include at least one or two properties that can be either renovated or developed for further capital uplift. But it’s not only about what you buy, it’s also about the way the property is purchased. A shameless plug here as this is what we specialize in at Crave – building portfolios that deliver lifetime income. Currently we’re mostly focused on building portfolios that include Australian and New Zealand property, but we should be organized for purchases in at least four other countries soon. If you would like to know how to build or balance a profitable portfolio, give us a call.
2019 will no doubt be another year to remember, but for now it’s all ahead of us. I hope the trends outlined above will provide you with a good planning framework, but there’s plenty more trends on the horizon (including smart homes and autonomous vehicles to name a few) . If you have one (or more) trend you would like to suggest, please send them on through to us at email@example.com or comment on our social media pages.
Buy smarter = limitless ways to build lifetime income
Crave Property Advisory is a unique property strategy and buyers agent service. As the only independent and unbiased advisory that can help you use any property strategy Australia-wide, Crave’s services extend to home, investment and commercial property. A highly client focused organization, Crave developed the Modular Investing System (MI System) to provide clients with the ability to use a tailored mix of strategies and efficiently build profitable portfolios that create lifetime income.
Debra Beck-Mewing is the CEO of Crave Property Advisory, and has more than 20 years’ experience in property investing, Australia-wide. She has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is skilled in identifying development opportunities, and sourcing properties that have multiple uses and multiple exit strategies. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business.
Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.