Melbourne Property Investment
The Melbourne property investment market has moderated but the fundamentals for long term capital growth remain strong. Based on the population and demographic projections prepared by the Australian Bureau of Statistics (ABS), the Housing Industry Australia (HIA) in its housing to 2020 report estimates that Victoria will be home to an additional 405,100 households by 2020.
In order to satisfy demographic demand, the stock of dwellings in Victoria will need to grow by approximately 45,000 properties per year through to 2020. This means Victoria needs to build 13,000 (3.3 per cent) more property in the remaining nine years to 2020 than were built over the last nine years.
Population growth in metropolitan areas in and around Melbourne continue to out pace the growth in regional Victoria. Factors such as this contribute to the rental market remaining strong in Melbourne as the city continues to have very low vacancy rates.
The Melbourne investment property market has performed very well in recent years. Melbourne continues to experience strong population growth from overseas. Victoria's population has significantly increased above the national average and it is expected to continue doing so in 2013 and beyond. This, along with the gradual rebalance of the marginal oversupply of property for investment, ensures that pressure remains on residential investment property prices in the long term.
Stick to property investing fundamentals and ignore opinions as to where the market is going, whether good or bad. Buying strong investment properties is more about asset selection rather than timing. Timing is impossible to consistently get right. Don't wait for the right time to buy. Wait for the right property to buy.
Like any real estate investment, locating and purchasing the right investment property in the right suburb requires careful consideration and research. Buyers should look for suburbs that have strong positive attributes (more details in our infopack). For example overall appeal, good public transport, good schools, shops, close to arterials and above all, invest in areas that are conistently showing a growth in population.
Affordability. Melbourne residential and investment property sector is performing well and many analysts predict it to continue doing so.
Pent up demand. Many leading economic forecasters believe there is an undersupply of new housing in Victoria.
High consumer confidence motivates people to make more long term decisions such as purchasing a new home.
Improved immigration numbers. Melbourne's population is now increasing at a faster rate than most other capital cities, with the exception of Perth and Brisbane, which will ultimately leading to an increase in the demand for housing and investment. Population growth is around 2% - well above the national average of 1.8%.
Returns on Investment Properties
Real estate investors in Melbourne should be aware that the prime reason for investing in property is capital growth, and capital growth is driven by the scarcity of an asset. When selecting a property for capital growth there should always be a consistently greater level of demand than supply.
Remember, that when you select a unit as an investment, succumbing to the lure of tax savings is a fundamental mistake for investors. You do not attain financial independence through saving tax - you gain financial independence through the ongoing capital growth of your assets. So, get the location right and the returns as well as the capital growth should follow.
The Annual Return Index measures the capital growth of an investment property together with net rental income, to give an accurate comparison between Australia's cities. Melbourne's residential property will make another steady start in 2012 and continue to do so in the long term. Investors should be very selective in terms of suburbs they consider for property investment. As always, look at the level of infrastructure and population growth of any new areas in Melbourne. Comparisons between the Capital cities are best considered over 7 to 10 year periods with Melbourne, Sydney and Brisbane continuing to be good options for property investment in the future. Contact us for more information on recommended suburbs and locations in these cities.