Tuesday 06 February 2018
Article by Kelly Emmerton
Western Australia may just be the place to be for Aussie property investors in 2018 - as long as you’ve got the nerve to start out in a flat market and wait for future growth.
A recent survey from Momentum Wealth has shown that 41% of investors are looking to Perth over other capital cities on the eastern coast.
“We have been seeing more positive economic indicators, although certainly not like the boom times, and the property market has now produced and maintained more optimistic numbers which finally indicates a turn is occurring,” said Momentum Wealth managing director Damian Collins.
A whopping 67% of WA investors thought that now was a good time to get into the state’s market, an increase of 29% since last year. And Mozo’s Property Expert Steve Jovcevski aggrees.
“Perth is slowly but surely making its way back. Because the market is just at the beginning of its climb back up, there’s opportunity to get in at the ground floor and for investors, it offers an easier entry into the market than somewhere like Sydney, where prices are still steep enough to bar many people,” he said.
So if you’re keen to buy a little place out on the west coast, here are some top tips for buying in at the bottom of the market:
As with buying any property, getting the basics right is key, said Jovcevski. “Look for a property in the right location - near a school, shops and public transport - with a sensible floor plan. A parking spot or garage doesn’t hurt either,” he said. In Perth, investors should focus on places within 10-15 km of the city centre, where renters will want to live, and where there are still property bargains to be had.
While you need to do your research and thoroughly prepare before making a big move like purchasing an investment property, Collins said that “...investors who react slower to the turn, particularly as interest locally and from other states accelerates further, may have to work harder and smarter to take advantage of opportunities.” So time your move right, so you catch the market as it’s rising, not when it nears its peak!
A flat market can be the perfect opportunity for negotiating a better price tag. Jovcevski says, “at this point in the market cycle, some people who have seen their property’s price plummet over the last few years are just keen to sell and get out. Work out how badly the seller wants to offload their property, because that will determine how flexible they are on price.” Then you can haggle, make low ball offers or ask for discounts until you get a price tag you’re happy with.
Buying in a flat market is not all bargain prices, though. “A low market, like Perth, means high vacancy rates and low demand. For investors, that means there will likely be months when your property is empty, and even when you do have a tenant, you won’t be able to charge the same rent as you would in a competitive market, like Sydney,” Jovcevski explained. Before taking the Perth property plunge, make sure your budget can cover monthly investment loan repayments, even without rental income.
“Buying in a low market can sometimes feel like an exercise in fortune telling, because you’ve always got to keep one eye on the future,” said Jovcevski. That means, you can’t just look at what an investment property in Perth offers now - you should think about its future potential and buy with that in mind. “Ask yourself which areas in the city might be up and coming, which will hold their value and which might decline. You can’t always pick these things, but aiming for places with good infrastructure, close to city centres and with plenty of cultural clout are usually pretty safe bets.”
No matter where you’re buying, finding a low rate home loan is key to keeping your budget under control and maximising the value of your property investment. It’s especially important to get good value on your mortgage when buying in a low market, since as we mentioned above, you might not have rental income to rely on. “The key is not to overextend your budget, and only make the investment plunge if you’ve run the numbers and are confident you can handle any repayments,” says Jovcevski.
If you’re keen to make a property investment this year, head over to our investment loan comparison table to check out your options.Home loan tips