Investing for Capital Growth

Is a residential property a good investment? Sure, if you’re able to realize capital growth. Are capital gains assured? Only if you make the right real estate investment decisions.

While this line of questioning may seem generic, far too many investors in Australian property don’t get the high gains they expect and in some circumstances end up making losses. So, property investment can be risky and professional advice should be considered. Whether you plan to engage a property adviser or go the distance all by yourself, here are some key factors to keep in mind when assessing investment property.

Access to infrastructure and businesses

Proximity to shops, pharmacies and schools is a top priority for families. Home buyers also prefer areas that offer an easy way to travel around the city or surrounding suburbs via an efficient motorway system or multiple access points.

New versus old

You can enhance the value of an investment property by renovating or refurbishing it. Buyers have been seen to pay more for certain features, including extra floorspace, kitchen and bathroom updates, and landscaped outdoor spaces that provider better liveability. There are limitations to the extent to which you can renovate a unit. The same applies to a new, landscaped home.

Units versus homes

In areas with a greater number of units than homes, the preference is for homes, making units rather risky. Smaller unit blocks find buyers more easily than high rises. The extra costs of apartment amenities such as pool, spa and gym, and expensive strata fees for 30-40 floor high-rise buildings can add up to thousands and be quite hard to justify.

Capital growth is also generally lower in areas where the cost of a unit far exceeds the median home price than in areas where it is less than half the median house price.

Australia’s top-performing suburbs

Victoria continues to have the most desirable suburbs in Australia, featuring 39 of the 50 suburbs identified by CoreLogic. NSW had seven representations while Queensland had two. WA and Tasmania contributed one each to the list.

RankingStateSuburbProperty Type% Median Value Growth
1.VICCockatooHouse41.6%
2.QLDYerongaHouse40.9%
3.VICArdeerHouse38.8%
4.WACottesloeHouse38.7%
5.VICBroadmeadowsHouse34.2%

Source: CoreLogic

The housing market is slowing down after an extended run of growth.  Clearance rates and sales volumes are dropping which typically indicates a turn towards a buyers market.  Be prepared and some great long term investment opportunities are likely to be available in the near future.

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