- Cooling property markets should not deter prospective investors according to Buyers Agency Australia's Founder
- Reduced competition, strong rents and long term growth prospects among the reasons to invest
- Location is still important
The property prices are showing signs of easing and interest rates are predicted to keep rising, but Buyers Agency Australia Founder Dragan Dimovski believes now is still a great time to buy a residential investment property.
“It might be a surprise to hear that, but this is the time in the property cycle when we see the savviest investors buy,” he said.
Mr Dimovski offers five key reasons why to consider investing in residential real estate now.
1. Reduced buyer competition
Competition amongst buyers has eased according to Mr Dimovski, meaning residential property investors would benefit from buying now.
“With fewer buyers around competition has reduced and investors have an opportunity to buy while taking their time to ensure they are purchasing the right property and not overpaying.
“At this stage, new listings look to be rising, which means there is plenty of choice for active investors, but we don’t know how long this will last, as people may become reluctant to sell in a slower market,” Mr Dimovski said.
Sydney’s advertised listings are 5.1% above the same time a year ago and 1.5% above the five-year average, according to recent data from CoreLogic. Likewise, Melbourne’s advertised stock levels are 1.3% higher than last year and 8.1% above the five-year average.
It should be noted that on a national level advertised stock levels remain -10.3% lower than levels seen this time last year.
2. Low vacancy rates
Rental vacancy is at its lowest point on record according to research from Domain. The national rental vacancy rate sat at 1% in May for the third consecutive month.
“In this market investors generally won’t have trouble finding tenants, so they can be assured a rental property will be bringing in an income,” Mr Dimovski said.
3. Strong rents higher yields
“Low vacancy rates will also drive rents higher as renters compete for a shortage of available homes, which will push up returns for investors,” Mr Dimovski explained.
Elevated rental asking prices often result in higher yields. There are signs of this in Melbourne and Sydney, although yields seem to be steady on a national level.
4. Long-term growth prospects
Although price growth around Australia had slowed, Mr Dimovski has indicated that he sees the market moving into recovery and in time, prices rising again.
“Even though we are seeing predictions of major price falls, a crash is very unlikely to happen,” he said.
“This is because of the fundamentals of housing in Australia, which is that there is an ongoing shortage of property amid strong demand, which will only grow now that international borders are open and overseas migration is predicted to rise.”
5. Potential for higher tax deductions as interest rates rise
Mr Dimovski points out that some residential property investors would gain from greater tax deductions as higher interest rates mean their mortgage repayments increase.
“Although a property should never be bought to solely claim tax deductions, many investors do benefit from negative gearing,” he said.
Negative gearing is a government policy that allows investors to receive tax benefits when the cost of owning a rental property outweighs the income it generates.
“For some the recent interest rate rises will see their mortgage repayments creep up, which could push them from positively geared to negatively geared if their costs are now higher than the income from their property.”
Location, location
Mr Dimovski warns prospective investors to always select property carefully.
“Well-located property close to amenities and services, as well as employment, with the right attributes will maintain its value in any market,” he said.
“If investors are unsure about where and what they should purchase they should seek help from a professional buyers’ agent.
“Buying property is not a cheap exercise, so it’s something you want to get right.”
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