As Australia’s overall property markets settle into a more predictable cycle, investors are looking outside the Melbourne & Sydney markets to seek out opportunities for good value and strong capital growth.
Many investors are gravitating towards the South East Queensland region, where population growth and a raft of new infrastructure are in the pipeline. But before you sink your funds into this property market, there are some factors you need to be aware of.
1. Apartments are becoming more desirable
Demographic trends are always evolving and right now, we’re living through something of a milestone moment for apartment living.
Just a couple of decades ago, for example, buyers were opting for spacious four-bedroom homes on large blocks of land. Nowadays though, with one-person households the fastest growing segment of the housing market, apartments and units are becoming more desirable than ever before.
Projections from the Australian Bureau of Statistics (ABS) reveal that one-person homes are becoming as sought-after as family households; one-person households are up from 19% of all homes in 1986 to 24% in 2011, and they’re set to increase by up to 65% by 2036. In an age where convenience and simplicity reign supreme, it’s apartments that are driving many property markets forward.
2. The property market is still highly affordable
The media went into overdrive when Sydney’s median property price passed the magic $1m mark for the first time in 2015. For both investors and home buyers alike, this signalled the beginning of the end in terms of ever being able to invest in this market.
Just because you can’t afford to buy in Sydney, doesn’t mean you’re priced out of the property market altogether. In South East Queensland, townhouses, apartments and units for sale in pockets of the Gold Coast – including Palm Beach and Currumbin – are currently experiencing excellent growth, with some property owners adding hundreds of thousands of dollars to their wealth in the last 18 months.
Even with recent price growth, these markets are still far more affordable than Sydney and Melbourne, with BIS Shrapnel reporting in June 2016 that “affordability in Brisbane is at levels seen in the 2000s”.
3. Oversupply risks only exist in certain areas
Many property experts have talked about the potential ‘oversupply’ risks in property markets such as Brisbane and Melbourne. In a nutshell, the fear is that too many apartments are being built and there are not enough people in the market – either renters or buyers – to absorb it all.
With supply and demand balance, some investors are concerned that they’ll end up with an empty property on their hands. The reality is that the risk only applies in certain segments of the market.
In inner-city suburbs of Brisbane, such as Fortitude Valley and South Brisbane, these types of properties are at risk of becoming oversupplied and some landlords may be forced to discount their asking rents as a result. But in other markets, the supply of apartments to the market is far more subdued.
In Upper Mount Gravatt for instance, ABS figures show that around 80% of the market is comprised of freestanding homes, and less than 20% are townhouses and units. An apartment investment in this type of market would appeal to young professional tenants and remains unique in the market, while being protected from oversupply risks.
It’s important to do your research when deciding where you invest your hard-earned dollars. By making sure you understand the specific market conditions in a particular suburb, you’ll be able to distinguish between the strong growth prospects from the weak investment locations, thereby adding quality properties to your portfolio that move your wealth forward.