Is Australia hot property?

//Is Australia hot property?

Why are so many non residents investing in Australia?

It surprised us this week when we did some research on our current clients and where they come from. It turns out that around 20% originate from overseas. So, what is it they that they see in our market that the rest of us might be missing?

Why are so many non residents investing in Australia?

Their reasons for investing are the strong fundamentals that underpin the Australian residential property market:

  • Demand or the significant undersupply of rental property in many areas.
  • Awareness of the desirability of Australia as a place to live… either as ‘expats’ or word of mouth from countries where there is strong migration to Australia
  • Understanding of high levels of migration and organic growth placing further pressure on demand
  • Low new home construction rates, low availability of land and high development costs constraining supply
  • Strong prospects and forecasts of capital growth now widely discussed in our media
  • Strong rental demand and low vacancy rates
  • Relatively low borrowing costs
  • Stable political climate and economy
  • Simple foreign investment requirements (see FIRB section)

Sometimes, as locals, it’s easy to be complacent about the opportune time we find ourselves enjoying here in Australia and indeed, have enjoyed historically. Maybe it’s a reflection of their previous life experiences in other countries that leads migrants to view the opportunities on offer here in Australia as bargains?. More importantly, I guess the biggest lesson we can all take from this is, like most things in life, it’s how you look at any situation that dictates whether you see the glass half full or half empty!

So, assuming we’d all like our glasses half full (and as an investor for the long term, who wouldn’t?), where should we start looking to uncover those deals? We’ve also done a lot of research on that over the last few months as the market has changed and they’re not always where you’d expect. Like a recent duplex opportunity on the Sunshine Coast (where some reports claim it’s one of most ‘unaffordable markets in Australia’ yet others have one of the suburbs in the top 10 ‘most affordable’!) a buyer was able to secure land and build at around $635,000. The project came in under valuation and there are similar duplex already being marketed at $400,000 a side ($800,000 for the two) and rents for this type of property around achieving the $380 per week mark (around $760 per week for both). Even if this duplex doesn’t achieve the same resale or rents, the price or rent would have to come a long way back before this deal looks anything less than ‘great’.

It doesn’t even need to be something ‘special’ like a duplex. Another buyer was able to secure a block in the final stage of an estate for $40,000 below what other similar sized blocks had sold in that estate. With the right build, that property is now virtually cash flow neutral for them and in what is predicted to be a high capital growth area. More than 20 ‘sale’ blocks were sold in one weekend. These buyers were ready and seized an opportunity while others debated the virtues of buying in the end of an estate.

There’s some great opportunities out there and maybe all it takes to find them is a small change of mindset… happy hunting!