Professionals Real Estate The latest REIWA figures for the March 2011 quarter show that 10% or one in 10 property buyers in Perth are investors according to David Hobbs, CEO of Professionals Real Estate Group.
Mr Hobbs said that investor activity was now at half the historic rate which traditionally is around 20% of all property buyers.
“This low level of activity by investors has been mainly due to the fact that many have been ‘sitting on the fence’ to see how the market will perform and if property prices will continue to fall. Over the coming months, however, Professionals expects activity by investors to jump due to the fact that house prices are at the bottom of the current cycle and rental returns are rising due to falling vacancy rates. For astute investors, now is the time to purchase while other investors are taking a more cautious approach. There is less competition in the market and investors are in a position to purchase homes in some areas of Perth below replacement costs. Investing in real estate is all about timing. Unfortunately many people decide to buy an investment property when everyone else is buying, meaning that they miss out on the excellent opportunities which exist when trading conditions in the real estate market are slow as is the current situation.”
“The Perth real estate market is currently experiencing a similar cycle that occurred during the early 2000’s when sales were relatively slow. Astute property buyers who purchased a home during this period would have seen the value of their assets more than double since then, even taking into account the recent correction in property values. Buying an investment property is looking at longer term trends and it is only a question of when, not if, the local real estate market begins to rebound and prices rise,” he said.
Mr Hobbs outlined the following tips first time investors should consider when buying an
investment property.
- Spend time researching all aspects of the property market before even looking for an investment property. Issues such as negative or positive gearing, rental returns and depreciation are key matters that have to be considered by a first time property investor.
- Past trends in property values generally are an indication of future trends and therefore it is wise to examine the long-term capital growth rates of the suburb. REIWA can provide property value trends for most Perth suburbs for the last 10 years at least.
- · Take a broad approach to buying an investment property. Most first time property investors buy a property in their local neighbourhood because they are familiar with the area. By taking a narrow approach to the location of the investment property, first time investors therefore severely limit their options.
- Try to target suburbs in lower priced areas which have a higher number of properties for sale. A simple tip is to check the weekend papers and identify areas which have a larger number of newspaper advertisements.
- When you have selected a suburb, don’t make an emotional decision when choosing a specific home. Most first time investors purchase a property they would like to live in. It is important to remember that the investment property must appeal to a tenant who will be paying the rent.
- Check out any planning changes proposed for the suburb. Many local governments are undertaking reviews of zoning which could have a major impact on property values. For example, a property that was purchased for a single residential use and then rezoned by the local council as a triplex site will increase substantially in value. The planning department of a local government can advise first time investors of any proposed zoning change.
- Check out any planned infrastructure changes for an area you are interest in buying. For example, an upgrade of a local shopping centre or sitting of a new railway station can have a major impact on local property values. This trend occurred in Rockingham following the extension of the southern freeway.
- Make sure that there are tenants prepared to rent your property. Rental income is a key factor in serving the loan so if you cannot find a tenant then you will have problems keeping the investment property over the longer term.
- Check your finances before you consider buying an investment property. If you have pre-approval finance it will allow you to move more quickly to secure the right investment property.
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