Investing in a post-Covid world: REA economist Paul Ryan shares his advice to budding buyers

OPINION: The global pandemic has changed the way investors view the property market, with some major considerations needed when looking to buy, writes Paul Ryan.

Property investment will look very different in a post-Covid world.

COMMENT

Successful property investment strategies will need to adapt to the post-pandemic world.

The decline in interest rates has pushed up property prices across the country, a tide that has lifted (almost) all boats. But with the cash rate target at 0.1 per cent, and the RBA not expected to move into negative territory, this boost has reached its limit.

MORE: Rent falls: best suburbs to be a tenant

Every NSW suburb’s median home price

Property investors will still be able to obtain capital growth in the future, but they will have to do their homework; the fundamentals of property investment will be increasingly important. Potential investors should think about what regions have connections to industries with growth prospects, good access to services, amenities and transport links, or will in the future.

Online auctions have taken off and appear likely to stay. Picture: Sam Ruttyn

The other consideration is where future buyers and current tenants will want to live. Increased remote working is likely to continue to benefit regional areas, although not all will benefit equally. But demand for inner-city areas is likely to return with borders opening and immigration recommencing.

The preference shift among buyers and renters towards larger dwellings, both within cities and away from them, is likely to continue.

Nevertheless, rental yield is likely to be increasingly important for future investors. As well as finding dwellings that are in-demand by tenants, investors should do their research on costs. Maintenance can vary significantly from house-to-house or between apartment blocks. Other fees, such as agent fees and rates can add up.

Many investors have decided 2021 is the right time to get into the market. Monthly loan commitments to investors have doubled compared with a year ago and are close to the peaks seen in 2015. At the same time, many existing investors have used the hot market conditions to sell.

Analysis using realestate.com.au data shows investors now make up more than a quarter of all recent sales.

Successful investors in the post-pandemic world will have to adapt to how COVID-19 has affected the property market. Property investment requires more work than other investments, but the past has shown the work can be rewarded.

Originally published as Investing in a post-Covid world: REA economist Paul Ryan shares his advice to budding buyers