Vacancy rates are still disturbingly tight in some regions of Gold Coast and Brisbane, sparking experts to say investors are sorely needed to ease the post-pandemic rental crisis.
Areas in particular need are the non-metro areas – the fringe zones that still provide access to beaches, CBDs and amenities without the hefty price tag or overwhelming competition.
In our new Covid-normal reality, the overheated property market has been a big surprise, but it’s also just the opportunity investors look for: a market with high rental demand, low supply and forecast growth.
Smart buyers are seeing the dollar signs
In December 2020, investor loan approvals in Australia rose by 13%, the highest increase since mid-2018. It’s a sign that a number of investors are realising the potential of the property market after the astonishing uptick in 2020, that has continued through the first quarter of 2021.
The hot competition for property isn’t showing signs of slowing just yet either, but it’s owner occupiers – many of whom are savvy interstate buyers – who are driving prices and pushing rental demand.
The soaring property prices have inspired more landlords to sell their properties for big gains, leaving a bigger hole in the rental market and many renters in the cold.
Despite the increase in investor activity, it’s surprising that investors are still staying fairly low-key in the market, possibly because of the high property prices. The exceptions are those looking deeper at rental demand and suburbs less affected by competition.
A recent study by Property Talk Australia and the Real Estate Buyers Agents Association (REBAA) revealed almost half of those surveyed had plans to buy an investment property.
Of those, 84% planned to use a ‘buy and hold’ strategy, given the market’s projected growth over the next two years. Westpac economists expect the national property market to grow by 10% in 2021 and 2022, and up to 20% in major cities.
The freeze on our low interest rates, and the squeeze on vacancy rates is giving investors significant potential financially, according to REBAA president Cate Bakos.
“Now, more than ever, investors can circle in on a cash flow neutral, and in some cases positive, outcome when targeting specific regions,” she said.
Where to buy for investment potential
While most areas in South East Queensland are seeing tight vacancy rates (70.2% of Queensland’s rental vacancies remain under 1%, according to Real Estate Institute of Queensland’s latest report), there have been some surprising outcomes.
For example, northern Gold Coast suburbs have seen unexpected demand and undersupply of rental properties, some coming in with 0.1% vacancy rates.
It’s these ‘outskirt’ and outer-ring suburbs that show potential for investors. They’re typically more affordable, but still offer excellent lifestyle opportunity, particularly in South East Queensland where the drawcards are the major highway, Brisbane access, and the beach.
The REBAA research shows houses are performing better than units and townhouses.
Move-in ready house and land packages are expected to see demand, but remain generally unaffected by competition-driven prices. They work well for investors by offering excellent depreciation value and builder’s warranties, which provides lower maintenance costs.
These new-home packages can be sourced in high-growth corridors surrounding Brisbane and Gold Coast.
The combination of low interest rates, renter demand and expected growth could spell a winning combination for investors willing to take advantage of the new property market.