As a professional property investor and the managing director of an investment property buyer’s agency, I’m always challenged by my clients and peers alike with the timeless question, ‘where’s the next hot spot”?
My answer is always (to their dismay) “it depends”. It depends on a myriad of aspects. These range from:
- What’s your objective?
- What’s your time frame?
- What’s your current equity/ cash position?
- What’s your risk profile?
The reason why each of these elements are so important is the fact that each response will demand a slight modification on the property type/ location/ price point/ deposit amount/ hold period which should be applied.
Now that being said, there are some undeniable facts with property investing which cannot be ignored. These facts pertain to raw historic data and translates to profit made in property and loss made in property.
The first point which I am always staunch in my views is that capital city properties are much less likely to resell at a loss as compared to regional town properties. (6.9% of capital city properties sold at a loss as of March 2016 as compared to 13.1% of regional town properties) that’s almost a 100% increase in likelihood that a regional city property will sell at a loss. Worth noting.
The second point is also an unequivocal fact. Across the combined capital cities, properties that sold at a loss as of March 2016 were owned for an average of 5.4 years as compared to properties which sold at a profit being held for an average of 10.1 years and further more properties which sold at double the amount or more were held for an average of 17.2 years.
Now looking deeper into each of the capital cities over the past 10 years, each city has shown some distinctly different trends and these trends do dictate where we are sourcing property and why focusing on the east coast we have observed the trends below.
Sydney as an example, post the early 2000’s boom saw property selling at a loss of upwards of 20% between 2004-2006 which was a testament to investors buying at the peak and exiting (being forced or otherwise) when the market was on a flat or slightly downwards growth cycle. Sydney has since seen the best performance of profit making property up to early since 2010 to 2016 with almost 97% of all property transactions making a profit. We do however see history repeating its self in the coming 3-5 years in the Sydney market with price growth and wage growth being on a disproportionate trajectory.
Melbourne has remained relatively stable over the past 10 years with total loss making property hovering around the 5-7% mark, however the inner city Melbourne market is showing signs of an upward trajectory in loss marking property which we see is a direct result of the current oversupply of units and medium density properties coming to the market in the short/ medium term.
Brisbane has been an interesting case over the past 5 years with a huge spike in loss making property between 2010 and 2013 peaking at around 17%. But the signs are positive for the coming 3-5 years within the middle/ outer ring suburbs with a strengthening economy, employment signs looking more positive and a comparatively low base with strong yields there are better times ahead.
The morale of the story, invest based on facts. The facts state that there is almost a 100% greater likelihood that you will make a profit if you invest within a capital city, there is a very strong likelihood that if you hold for a period of 10 years+ you will be making a profit and if you hold for 17 years+ you will double your money.
Now these are obviously averages and my companies job as an investment property buyer’s agency is to beat the averages. But ultimately the facts are undeniable.
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