COVID-19 has brought a lot of doubt around getting into the property market. So how do you find the right place at the right time?
Darren Venter - Principal Buyers Agent for Strat Prop - explains that since the start of the pandemic, we have seen reports from the banks come in at 30% to 40% loss, then reduced to 15% to 20% and now with the latest reports of no more than 5%.
While there was a lot of misreporting in these figures, a lot of it was also due to the lack of understanding around the assumptions.
As Darren advises, when deciding deciding to enter into a property market for investment purposes, an important rut is to avoid thinking about the 'Australian property market' as a whole. He says this because it’s not one market but many; and each market has its own characteristics which are influenced differently by global and domestic events. Strat Prop monitors over 3,500 suburbs and has strong data on current and projected growth in more than 40 suburbs. These suburbs are well positioned to achieve 7% growth, are all positively geared and trending upwards.
Now that this fundamental fact about the Australian property market is explained, let's elaborate on future projections and how they can be better put into context when assessing the areas we are looking into. Darren calls it the model of 'being in the right place at the right time'.
The Right Place At The Right Time
Darren and his nationwide team have observed that vacancy rates (considered to be one of the key lead metrics for future direction of property markets) are opening up in some areas and certain markets are losing demand due to population relocation into regional areas. The areas with population influx are growing in demand and vacancy rates are tightening up.
This is supply and demand 101.
However, vacancy rates and population movements are not always enough to decide on the right areas to focus on when looking for pre-boom markets. We need to also understand the driving factors of why this is happening. Enter infrastructure and amenity.
COVID-19 brought on large infrastructure investments implemented by Fast Track 2020 projects, which is a large amount of budget spending on infrastructure growth by the Australian government. More than $300 billion worth of projects have been put in place to help recover the Australian economy. These projects span from housing injection, airport expansions and transport additions through to building new hospitals, universities, and even full cities.
What Does Regional Migration And New Infrastructure Mean?
If we line up what we know about the historical data, understand the current trends and align this with the right kind of additional infrastructure, we can make safer assumptions for market movement in the future. We base it on logical growth mapping, rather than 'taking the hit and hope' approach to property investing.
With so many projects nationwide, the growth impacts of each will vary and so will the yields as well as vacancy rate, days on market, population demographic and a lot more.
As Darren concludes, all these factors will affect your investment outcome and so your strategy will need to align with the area you are looking into.