Read time: 4 minutes, 03 seconds. Buying a home is a big decision. For first-time buyers, making such a large investment can be overwhelming. Especially, if you have no idea what to look for when...
Where to Look for your Next Property Investment Purchase
The Australian property market has always been shrouded in mystery and appeal. Many of us are still waiting for the forecasted “popping of the bubble” that many people predicted over the years.
Even now, as we recover from a pandemic, there’s an obvious imbalance between supply and demand. There are more buyers out there looking for properties than there is property available to sell. To put it plainly, we are experiencing a post-pandemic property market boom. With more buyers than sellers right now, property prices are being driven up. Government programs like FHLDS are giving first-time homebuyers a leg up. That is one reason properties are disappearing fast from the market.
The Australian Bureau of Statistics reports that property lending is increasing for both residential lending and investor lending. The residential lending sector saw a 2.8% increase in April, while investor lending increased by 2.1%.
In the first week of June, property prices in Sydney went up by 0.5%. At the same time, property prices in Melbourne and Brisbane increased by 0.4% each. That’s in one week! According to a prediction by the Commonwealth Bank, housing prices across Australia are expected to increase by 16% in a matter of 2 years. You can expect a 9% increase throughout 2021 and then another 7% hike for 2022.
So with housing prices rising and “time on market” hitting an all-time low, you must choose wisely where you invest. It’s easy to get caught up in the fear of missing out, but if you do, you could feel the pinch later on. So where should you be looking for your next investment property?
The property market in Australia is now experiencing a regional shift. In the past, it would have been a solid game to bet your luck on units in the urban areas of major cities. Especially if that property is close to the Central Business District! Right now, however, property experts are predicting the end of an era. This is chalked up to the new work-from-home revolution. People are looking for more house space in quieter areas.
In 2020, house prices in Adelaide increased by 6%, while unit prices went up by 13.5%. This growth should continue throughout 2021, with house prices settling somewhere between 5% and 8%. Suburbs like Tennyson and Glenuga have the highest property demand in Adelaide so far.
The current median housing price is $1.2 million for Glenuga and nearly $1.6 million for Tennyson. Largs Bay, while less expensive, is seeing the highest rental yield in Adelaide. With Largs Bay’s median housing price averaging $600,000, they’re experiencing rental yields of 3.8% and 5.7% for houses and units, respectively.
Let’s take a look at Melbourne and Sydney. Melbourne’s property rates should reach heights of up to 12%, while Sydney’s growth rate is expected to reach up to 11%. A Sydney suburb like Bardwell Park, while on the higher end for prices, definitely shows promise of healthy growth. The forecasted compound growth rate over the next 5 years for houses in Bardwell Park is 1.5%. Bexley is a bit more affordable, though. With the medium house price at around $1.4 million, you can expect a 5-year growth rate on a Bexley house of 2.4%.
Supply vs Demand
One thing remains constant in our current environment. Whether the prices are high or low, the houses aren’t staying on the market very long. According to CoreLogic, Melbourne’s auction clearance rate recently settled around 70%. Sydney, though, only recently started to slow down since the beginning of the year, settling at around 80% by the end of May. This comes as no surprise as all major cities are seeing sharp increases in the monthly value in all dwellings in comparison to past months and years.
The first quarter of 2021 recorded the highest increase in house values in the past 18 years, with a 5.8% leap. The good news for you, the property investor, is that council approval for the construction of new homes is also seeing a record high. Currently, approvals for building new houses jumped by a massive 3.4%!
If you need further assistance in your investment journey, reach out to our team at MLS Finance.
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