Planning to purchase an investment property in 2021?
If so, please brace yourself for a few massive surprises.
Confidence in the ‘bricks and mortar’ security our national property market provides has never been higher. Surveys are highlighting how competitive many of our emerging property hotspots are about to become due to more than a quarter of Australian working adults expressing how eager they are to buy an investment property in 2021.
Here’s a few tips to help you navigate the year ahead:
I doubt we have ever seen a safer time to invest in property.
Interest rates sit at an historical low level and are expected to remain this low for at least the next 3 years, and there is no expectation for interest rates to rise significantly for many years to follow. The banks have passed on most of the benefits to investors resulting in many property investment loans now ‘paying you’ rather than investors struggling to service mortgages.
The affordability of Australia’s hottest postcodes has also never been better. The booming regional markets offer exciting investor opportunities at half the price of many postcodes within Sydney and Melbourne, but also offer double the rental income (or more). Families, who once felt trapped in urban jungles, are now able to relocate to amazing lifestyle locations. This has been made possible due to companies embracing the benefits of a remote workforce, empowering families to dial up their lifestyle, dial down their stress levels, and even potentially enter the property market that they previously thought was way out of their reach.
Investors can also draw confidence that the RBA is not expressing a need to slow the emerging housing boom due to the fact most growth is expected to be seen outside Sydney and Melbourne. The RBA recently forecast a 30% rise in property values over the next 3 years due to record low interest rates. If this growth is predominantly seen in our regional markets, median prices in these areas could jump as much as 50% and still remain more affordable than many big city blue chip suburbs.
Surging levels of investor confidence, combined with new found levels of affordability, is resulting in unprecedented competition between property buyers. Most properties listed for sale in our hottest regional locations currently fail to even make it to an open home due to the volume of buyers hovering like seagulls waiting on a hot chip. No longer can you expect to casually walk through an open home and expect to then have time to go away and start talking to your finance broker. The speed of the market now dictates that you must have your finance pre-approved before targeting a property or you are very likely to have little chance of securing the home.
Vendors are also very aware of the power they now possess. Builders and land developers, two very important elements in an optimal property property investment strategy, are both much more attracted to dealing with ‘home owners’ rather than ‘investors’. This is largely due to the emotional connection families have with buying a family home, and the fact vendors believe they will fight harder to ensure the sale happens. This is leaving many investors disempowered and totally outnumbered.
Many of the best regional locations are well prepared for population growth. A huge investment in infrastructure (Medical facilities, airports, universities, retail facilities, etc) has been underway in these markets due to forecasts around the millions of baby boomers who were expected to downsize family homes in our biggest cities to relocate to lifestyle cities within each state. Obviously these forecasts didn’t consider the impact of an event like COVID-19.
Today these lifestyle cities are recording unprecedented levels of population growth that is far greater than the volume of properties within these markets. When an unexpected wave of demand hits any postcode the number of properties available to rent falls and property prices rise. But COVID-19 has triggered many waves of buyers and renters, leaving countless families with very little chance of being able to secure a property to rent or buy. As leases expire Landlords now have the ability to review the amount charged for rent, and with rents skyrocketing in dozens of key regional hubs a rental crisis situation is rapidly emerging.
Whilst an undersupply of rental properties certainly excites property investors, the ugly truth is that securing the residential land required to build these properties is rapidly becoming almost impossible. The release land by land developers is often faced with a volume of buyers far greater than the volume of lots that are about to be offered. 50 lots of land can attract 200 expressions of interest from cashed up buyers. So great is this demand that I have heard examples of ‘websites crashing’ on the day investors can lodge an expression of interest.
We need to link arms now, more than ever before!
Linking arms as investors provides our greatest chance to overcome these obstacles. Even as individual buyers (not a syndicate, etc) we will be much stronger together. Our united buying power offers us a unique advantage over most buyers, plus this provides more negotiating power when we reach out to Australia’s biggest land developers and builders, many of which we already have long relationships with.
Over the coming months I plan to work closely with fellow investors to see how I can best support you in 2021. This will be a free service, but to ensure we focus our energy on the investors that need our support most we will be charging a ‘retainer fee’ that will be fully refunded when you purchase. For more detail register your interest below to receive full details.