February 13, 2019
Perth and Brisbane top choices for property investors
- Perth and Brisbane considered the best capital cities to invest in
- 70% of WA property investors believe it's a good time to buy in WA
- Lending restrictions causing concern amongst investors
- Negative gearing set to impact over 60% of investors
Perth and Brisbane have emerged as new property investment hotspots as investor interest continues to shift from the declining Sydney and Melbourne markets.
A survey of 483 investors across Australia by property investment consultancy Momentum Wealth showed that Perth and Brisbane were leading the pack when it comes to investor preference, with 36% and 33% of survey respondents highlighting the respective capital cities as the best places to invest.
Team Leader of Momentum Wealth's buyer's agents, Emma Everett, said a combination of affordability and potential growth opportunities had likely contributed to higher levels of investor interest in the capital city markets.
"Whilst both markets offer strong levels of affordability compared to Sydney and Melbourne, they also hold promising opportunities for long-term growth, with Brisbane already experiencing overall price growth and areas of Perth performing strongly as the market enters its recovery," she said.
Ms Everett said that investors looking to take advantage of current conditions will need to remain vigilant in their property research and selection.
"In these early stages of recovery, it's not uncommon for different areas of the market to experience price growth at different times, so investors will need to remain diligent in their research to ensure they are selecting an area that aligns with both their investment strategy and growth expectations," she explained.
The survey also showed that professional service firms were regarded as the most credible source of information when researching the property market, compared to only 1% of investors who ranked friends and family as the best source of property research.
Hometown confidence hits a high in WA
Whilst Perth was considered the best place to buy amongst overall respondents, the survey also highlighted a considerable rise in home confidence, with an overwhelming 70% of WA investors finding Perth to be the most appealing capital city to invest in.
This marks a further 4.5% increase from last year's survey, when the proportion of WA respondents preferring Perth spiked a staggering 29% from the year prior.
Ms Everett said renewed confidence is already leading to price growth in some areas, but warns investors need to act fast to avoid rising levels of buyer competition.
"Perth is offering some great buying opportunities for investors looking to take advantage of current levels of affordability, but those looking towards high-demand suburbs will need to move quickly or risk entering the market when competition levels have already picked up."
"We are already seeing significant evidence of this in some areas of the market, with increased activity from trade-up buyers resulting in significant price growth in Perth's central sub-region across the past 18 months," she said.
Lending restrictions still a barrier
Whilst investors are recognising the potential benefits of entering the market, lending restrictions continue to pose a barrier for some, with a number of investors finding increasing difficulty in securing finance in light of recent APRA changes and the Banking Royal Commission.
The survey showed that 67% of respondents had reviewed their loans in the 12 months to November 2018, up 8% on the previous year's results.
Team Leader of Momentum wealth's mortgage broking team, Caylum Merrick, said the challenging lending conditions highlight the importance of regular loan reviews in ensuring investors continue to receive the support they need.
"In today's lending environment, and in any lending environment for that matter, it's vital that investors conduct regular loan reviews to ensure they are still receiving the best rates and products to support their investment goals."
"Whilst we've seen record low interest rates in recent years, we've also seen a number of buyers impacted by changing lending restrictions. With many banks now raising their interest rates outside the RBA cycle, it's more important than ever that investors keep their finger on the pulse," he said.
Negative gearing set to impact majority
The potential changes to negative gearing proposed by the Labor government pose a further source of uncertainty for some investors, with 61% of survey respondents revealing they have a negative cash flow portfolio.
Ms Everett said that whilst investors who rely heavily on the tax benefit will need to be mindful of the impact of such changes, it's important they remain focused on the fundamentals during the property selection process.
"Whilst negative gearing provides a useful tax benefit for those with a negative cash flow portfolio, investors need to remember that tax offsets only form a small portion of a property's overall returns, and that factors such as land value, location and tenant appeal remain critical to a property's performance."
"Investors who get these fundamentals right from the start will be better placed to weather potential changes and short-term volatilities in the market," she said.
Ms Everett said that any investors who are unsure or concerned about the potential impact of recent changes, including shifts within the lending environment, should seek advice from an independent investment advisor.
"It's been a challenging and at times confusing period for investors trying to navigate through these complexities themselves or relying on unreliable sources to guide them, so it's important that they seek professional and independent advice to ensure they fully understand the opportunities and risks specific to their situation," she said.
For a copy of the survey report or to
