Capital cities, regional areas, houses and units all saw an increase in rents in the first quarter of 2022, culminating in the highest calendar year growth rate since 2007 (source: CoreLogic). Whilst vacancy rates are falling sharply in Melbourne, rents are rising steadily.
Property shortages, strong demand and rising yields are contributing to an increase in confidence for investors. In fact, the value of new investment loans doubled to around $11 billion over the 12 months to the end of March 2022 (Source: ABS).
Property can be an attractive investment and one that should always be considered in a well-diversified wealth-creation strategy. In this article we take a look at some considerations to keep in mind when building your property portfolio.
Do your research
Investing into blue-chip locations is preferred compared to high-risk zones. Locations where demand is higher will provide lower investment volatilities and more consistent growth. These areas may be within specific school catchment zones to prestigious schools, have great public transport links, be close to shopping facilities or have an abundance of recreational and sporting facilities. With greater Melbourne forecast to grow from 5.1 million inhabitants to over 8 million by 2050, the demand for these areas will continue to stay strong well into the future.
Be sure to purchase at the correct stage in the market cycle. Each location and property type will have a different time that is right to buy. Seeking guidance from property professionals can help guide this purchase.
Head versus heart
The psychology of investing can lead to poor decision making. Purchasing one of the largest assets you will ever buy may feel overwhelming, but be sure to purchase with your head and only partially your heart. Calculate, analyse and set a maximum purchase price and stick to it. When it comes to an investment it should predominantly be about the numbers; however, if you can’t see yourself living in this property then neither may others.
Also consider your tolerance of volatility – property values will fluctuate over time, and you need to be confident your strategy will be robust through all market conditions.