Where should I buy?
Choosing where to buy an investment property can be confusing. What state do I choose, what suburb, even what type of property can all add to the consternation felt by investors. There is plenty of information available but we thought we would help with the decision making process by giving you five reasons why you should consider Melbourne as the place to buy your next investment property.
1. Strong property market
There are areas of Melbourne that represent good value to the investor depending on whether you are looking for cash flow or capital growth. The benefits of an investment will come down to what you want to get from it. The selection of the type of property as well as where it’s located can see property either create wealth or a passive income stream. Getting into the market is vital to create a property portfolio. Melbourne has a variety of suburbs that are in continual strong demand either from lower prices and subsequent affordability or because of the upcoming infrastructure projects place them in a more attractive location for employment opportunities. As we know, population growth creates demand for housing and employment. Tapping into those opportunities can accelerate your wealth creation strategies.
2. Population Growth = Demand
Where ever Demand for property is high, property prices increase. Demand always underpins prices and this remains true in any market. On the back of property prices, rent also increases. It’s clear that population growth in Melbourne is increasing, just as there is no doubt that those people moving to Melbourne will need a place to live.
Considering that in 2015 -2016 Melbourne had the largest growth of all Greater Capital Cities (107,800), followed by Sydney (82,800), Brisbane (41,100) and Perth (27,400) it’s safe to assume that demand for property will increase as well. It’s also worth noting that Melbourne also had the fastest growth (2.4%), ahead of Brisbane (1.8%) and Sydney (1.7%).
A lot of people move to Melbourne to take advantage of employment opportunities, which contributes to the increase in population. Also, overseas immigration numbers contribute to that growth as well which shouldn’t be overlooked. The bottom line here is that more people mean more houses are required to house them all. What is exciting about it all is that this presents an opportunity for the astute investor.
Where will all these people live?
3. Vacancy rates
Real estate.com.au reported in March that Melbourne’s vacancy rates were the lowest since 2007. The proportion of vacant properties in metro Melbourne fell slightly to 2.2 per cent in April 2017, while the weekly median rent for houses in metropolitan Melbourne was $420 a week. The immediate result of this sort of situation obviously is higher rents. While that is unfortunate for a potential tenant, for an investor that means better yields and better cash flow. Combine this with what we know about population growth and the reasoning for selecting Melbourne property starts to become clearer. Higher demand will be revealed by multiple applications from potential tenants for each property.
For every property portfolio there has to be a property management plan. Serious investors know that engaging a property Manager is far more efficient than doing it themselves. A large portfolio will demand property management solutions that are efficient and easy to deal with.
Melbourne is consistently named as one of the most livable cities in the world and anyone who has lived in Melbourne will readily agree. Melbourne and it’s surrounding suburbs are famous for their café culture lifestyle. It seems that a café is always within easy reach when your coffee fix hits you. Melbourne is also a popular tourist destination for overseas visitors who make use of the easy to use and readily available public transport system. Thankfully, Melbourne is easy to navigate because of sensible and logical town planning over many decades. We should also point out that Melbourne is arguably the sporting capital of Australia boasting such iconic events as the Melbourne Cup, the Formula 1 Grand Prix, and the AFL Grand Final.
Victoria’s economy grew by 3.3 per cent in the 2015–16 financial year, higher than compared with the decade average, and Victoria has consistently recorded the nation’s strongest annual population growth.
Increasing productivity and employment growth are helping to expand Victoria’s economy at a rate faster than population growth. This is important for property investors. The Victorian Budget Update forecast Victoria’s gross state product growth to grow above trend at three per cent, providing more good news for investors.
Victoria’s labour market is improving. Unemployment has fallen from a peak of 6.8 per cent in mid-2014 to 6.0 per cent in December 2016.
Part-time employment is growing strongly as businesses seek a more flexible workforce, and more people look for work, increasing the participation rate.
All in all Victoria is in a healthy position.
Obviously there are many more positive things that we could write about Melbourne and buying investment property here. The fact is that Melbourne represents a well-balanced set of circumstances providing an exciting opportunity to reap the rewards of property investing.