It’s clear that investors are back in the market in force. CoreLogic says residential investor activity nationally has increased from 22.9% of new loans at its lowest point during the pandemic to 32.6% today.

Investors are looking to capitalise on rebounding rental demand and apartment price growth, in particular, as migrants flow back into the country.

Remember, apartment prices didn’t appreciate as much as houses across Australia during the COVID-19 boom. This was because the market was dominated by upgraders purchasing houses, and we had no migrants or international students coming in seeking apartments as their first homes here.

The rapid rise in bond rates since COVID-19 really hurt investors here. Now that the cash rate has dropped, their net rental yields can be pretty attractive.

One of our office conversations this week was about a local house that sold on the weekend for $500,000. It rents for $425 per week, which is a gross yield of 5.8% on investment.

This is a big clue as to why apartments are increasingly being snapped up by investors.

Another reason for the current surge in apartment demand is that first home buyers have virtually been wiped out in Sydney and Melbourne. Property prices have grown too far and too fast for first time buyers. They are virtually priced out of the market. Cities such as Sydney and Melbourne are seeing a dramatic dearth of first home buyers.

 

Target the right property

We’ve seen a lot of investors buy properties that were the wrong mix of location and style and then be surprised when they don’t do as well as they’d hoped. Here are four things to think about when buying an investment property.

Location

They say the three most important things in real estate are location, location, and location. Find a property that’s in an established, growing area.

Proximity to the CBD – the closer your property is to the city centre, the greater the demand

Proximity to high-income suburbs – the closer your property is to suburbs where a high proportion of residents earn higher incomes, the higher the demand

Proximity to quality education – the closer your property is to a quality school, the greater the demand with tenants and owners alike

Public transport – close proximity to rail stations and bus stops

Schools – as a family-orientated society, good schools are a prime consideration

Shops and cafes in the street

Freedom of frontage – having a garage, carport and car space in the street can be a significant advantage, and impact on the capital growth of a property

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