Melbourne has underperformed in comparison to Sydney and Brisbane for a while now, and that’s a bit of a disappointing result, until you scratch beneath the surface. The stats from the Australian Bureau of Statistics tell a tale that might be worth looking at a bit closer. See, Melbourne house prices have been trailing behind the rest of the capitals, and to top it off, the rental market in middle ring suburbs, where all the growth is happening, has seen demand tighten up something fierce. This little combo of low prices and rising rental demand in the same market is exactly what you want to see if you’re a savvy investor who’s looking for a return on investment down the line. Of course, it also makes sure that anyone who decides to make a dodgy call gets punished in short order. Because the thing is, if you buy into a market that’s struggling and it just gets worse year after year, well, that’s a hard habit to shake.
Where Investors Blow It Without Even Realising They’ve Made A Mistake?
The most expensive property investment mistake, and this just about always is, isn’t the auction blowout. Shelling out an extra $30,000 above market value is eventually recoverable through growth, after all. What kills you long-term is buying the wrong property in the wrong location, or even just the right property in a suburb that’s all wrong. And those investors who go in without a Property Investment Buyers Agent Melbourne bring all their own biases and opinions into the market, along with a healthy dose of media-fuelled hype. Vendor agents, on the other hand, navigate the market every day of the week. As a result, they tend to steer clear of properties that feel all safe and shiny and instead go for ones that might bring a little less of a return, but at least that’s what the market’s saying.
Australian Tax Office data shows Melbourne has got one of the highest concentrations of investment properties in the country. Given that, the competition for these properties in the right suburbs is going to be fierce, it’s not just a temporary thing, it’s actually how the market works. Access to off-market stock isn’t some luxury thing for high-end investors, it’s an absolute must if you want to get in at a price that actually reflects what the property is worth, rather than just getting caught up in a valuation war at a public auction.
Yield vs Capital Growth: What Comes Down To A Simple Choice
- Inner and middle Melbourne suburbs are known for their compressed gross yields, but they then tend to deliver stronger capital growth in the long term.
- In contrast, outer suburbs and the fringes offer higher gross yields, but the capital growth is also historically a bit more volatile, and lower.
- A good agent is going to give you some hard evidence when it comes to recommending suburbs: infrastructure stuff, sales analysis, government data, even the planning scheme changes that are going to affect supply.
More often than not, when investors skip over this sort of analysis, they end up with a property that’s got a high yield, but in a suburb where they’re going to struggle to hold onto it during a vacancy period. Because when it all comes down to it, a buyer’s agent’s main job is to match your investment strategy to your actual financial situation and horizon, not some pie-in-the-sky dream.
Scope That Matters When Buying With a Self-Managed Super Fund
There are requirements for limited recourse borrowing arrangements that limit the scope of the properties available and contract terms when buying through an SMSF. The buyer’s agent locates and sources a property within boundaries set by the client’s accountant and SMSF trustee. It is imperative to get this part of the deal out of the way first before looking for the property. Getting a compliance issue sorted after entering into a contract in an SMSF environment is much more painful than it sounds.
Measuring Whether the Buyer’s Agent Has Performed
Ask for samples of past acquisitions with purchase price, current valuations, and current rental yield. Ask if any of the properties that have been recommended have been disposed of at a loss and why. Look at the fee structure and determine whether or not it rewards completion or results. If an agent is comfortable with their performance, then they will readily provide that information. If an agent avoids your questions about their performance and instead answers with client satisfaction survey data, you can bet they are dodging your question.
The investors that made a good buy in Melbourne’s soft market will enjoy the eventual upturn in that market just like all undersupplied markets will experience a recovery. The investors that purchased the wrong property in the right suburb will watch the capital gain take place in their neighbour’s property.
