Residential investment fundamentals remain strong

Australia’s two major capital city property markets, Sydney and Melbourne have shown some sensational auction results in the first part of this year, giving the thoughtful residential property investor some pause.

That is not to say that investment grade yield and good property is impossible to find, but it does mean successful property investors must adhere to due diligence, take good advice and look for value in the right places. It goes without saying that these investment properties are situated around good transport links, where tenants are happy to live and the property has that important scarcity factor that allows appreciation over time.

Now that the emotional hype running up to the longer (and later) than normal Easter break is behind, we continue to see a softening in clearance rates.  This is particularly true in Melbourne where for 10 consecutive weeks this has been below 75% and in Sydney below 80% for the past 5 weeks. This is more probably a return to normal investment conditions in these markets.

As winter approaches, those property vendors who have missed out are more likely to negotiate. This provides some reappraisal of the buying opportunities with the underlying picture remaining competitive for property investors.

To summarise the current market situation:

  • Investment grade property remains highly sought after
  • Interest rates are at historic lows whilst competition amongst lenders is providing good supply of investment funding
  • The Sydney and Brisbane markets continue to correct themselves after periods of relatively subdued growth
  • The Melbourne market remains strong and opportunities still exist; Geelong fundamentals provide confidence for investment
  • Buyers are increasingly utilising SMSF funds to take advantage of gearing and tax benefits and adding valuable property into their long term wealth creation plan
  • Recent government announcements around retirement age highlight the long-term reliance on continued immigration to support an aging Australian population – this creates sustainable pressure on housing supply

In recent buying activity Portfolio Management Services continues to achieve excellent value in selected parts of Sydney, particularly for inner city houses and apartments and in Melbourne existing older style apartments positioned for lifestyle in the south and south east.

In Brisbane, stock levels are diminishing as the colder weather bites. However Portfolio is finding that those clients who are ready to act quickly can benefit by negotiation in this market where less than 30% of properties go to auction.

Those investors interested in the Brisbane market should contact Portfolio in good time where we have found sellers increasingly receptive to private offers.

Portfolio Management Services weekly investment property portfolio sessions are available by calling us direct or Contact us here or through any of the links on this site.