Property investment tips for life beyond the pandemic

Surging property prices across Australia have fired up investors and now is the time to think about longer-term plans.

House prices across Australia have been celebrating the end of the coronavirus pandemic early, growing at their fastest rate in 17 years last month.

And investors, who were generally quiet in 2020, are joining the party in bigger numbers. Existing and future landlords should now be thinking about post-pandemic property investment.

Binnari Property CEO David Hancock has already noticed a large increase in demand from investors.

“Many people saved a lot more than they expected to during COVID,” he says.

We’ve asked property and finance specialists for their top tips for investing beyond the pandemic.

1. HAVE A CLEAR PLAN

Hancock says the first question to ask yourself is “what do I want to achieve?”.

“Being clear on your goal will dictate where you should invest,” he says.

Investors should aim to generate positive cash flow, where rental income exceeds their costs, and this has become easier thanks to record-low interest rates.

Identify properties with strong capital growth potential, Hancock says.

2. BUDGET FOR INTEREST RATE RISES

“It’s always prudent to allow for an increase in interest rates or a decrease in rents,” Hancock says.

Mortgage broker Rebecca Jarrett-Dalton says investors should pay down debt while interest rates are low to build resilience against a future rate shock.

“Savvy investors should be considering the impact of future potential rate rises – knowing rates are at historic lows,” she says.

3. DON’T JUMP THE GUN

There’s almost a sense of panic buying right now in some real estate markets, but Jarrett-Dalton says now is a time to “watch and see” how unemployment and the vaccine rollout pans out.

“Watch changes in employment, where are employees being recalled to the office, and where are they able to continue working remotely?” she says.

“Are there opportunities that have arisen from new industries during the pandemic that will continue?”

Mete Karan, Principal of Ray White Glenroy

Mete Karan, principal of Ray White Glenroy, says it might be worth waiting.

“If buying, it would be wise to sit tight a little longer for wage support to finish, and hope that supply levels increase,” he says.

“There will be great buys. We’ve seen investors purchase in a sellers’ market, then to subsequently sell in a sellers’ market five or seven years later to only find they’ve made minimal profit.”

4. DIVERSIFY

While it’s common for investors to buy property in the same suburb in which they live, that concentrates their risk.

Look beyond your own suburb, and once you are more experienced invest outside your own city or state. This can also reduce land tax expenses.

Sarah Swarbrick, 27, lives in Sydney but owns a unit in Melbourne and recently reduced the rent to retain her tenants.

She takes a long-term investment view and believes in diversification. “Between my partner and I we have three investment properties – two in Queensland and one in Victoria,” Swarbrick says.

She also ensures she is financially able to cope with future interest rate rises. “When we are budgeting and forecasting cash flow, we are always aware that things change.”

Investor Sarah Swarbrick believes in diversification. Picture: NCA NewsWire / Gaye Gerard

5. IT’S SUPPLY AND DEMAND

Binnari Property’s Hancock says investor should understand the future supply of an area.

“If you’re going to buy an apartment, ask if there’s the potential for another 5000 competing apartments there over the next five years,” he says.

“Look for areas that are high demand and low supply.”

6. CONSIDER OWNER OCCUPIERS

The biggest losers during the pandemic have been inner city apartments that focus on tenants rather than owners, because these tenants – including overseas students – have all but disappeared.

“In Australia, the potential buying pool is generally made up of 30 per cent investors and the remaining 70 per cent as owner occupiers,” Hancock says.

“When an investor purchases a property, it’s vital that they appeal to the largest possible portion of the market. Understand what property type and features the local owner occupier market desires.”

@keanemoney