Thursday, May 18, 2017

Property Investors… Is it worth staying in the race?

Today there are three million residential property investors across Australia, and following the recent Federal budget announcement it seems many are feeling hard-done-by. 

The budget announced that tax deductions for travel expenses relating to your investment property will no longer be available. Depreciation deductions are also being limited to new items and new properties only. Property investors can still however, make a building write-off at typically 2.5% of the building cost each year. 

The general consensus among investors appears to be that property investment conditions are less favourable now, compared to three years ago. Interestingly, despite these new conditions, experts are still saying that when looking at the returns of alternative investment opportunities, property continues to lead the pack. 

So overall, how is the property market performing?

Adelaide and Hobart topped the charts with the largest growth in median house price in April, followed by Brisbane then Melbourne, Sydney, Perth and Canberra (CoreLogic RPData).

This latest report confirms what Team Toop 
has been feeling for a number of months. Adelaide is the steady performer, and as things slow on the eastern seaboard, we are becoming an increasingly popular option for buyers and investors.

What's causing Sydney and Melbourne to slow?

The investment landscape has changed. With higher cost of debt, and stricter lending and servicing conditions imposed on investors, the amount of investment activity over recent months has softened. Remarkably, investors make up over 50% of new mortgage demand in Sydney and Melbourne. This is huge. If investor activity starts to pull back, the level of activity and competition in the market follows.

Sydney and Melbourne are also experiencing significant urban sprawl. Speaking with local Real Estate Agents in Victoria, Melbourne is seeing more and more people moving out of the metropolitan CBD area to places such as Werribee, for pure reasons of affordability. Ten years ago the landscape from Melbourne to Geelong was essentially farmland. With up to ten housing developments on the go at any one time, the urban sprawl is very apparent, adding 
a big injection of property to the market.

So investors, is it worth remaining in the property race?

We believe yes... but looking at the specific city and suburb you purchase in is extremely important. 

Metropolitan Adelaide and Hobart remains somewhat immune to the full effects of these changing investment conditions. Affordability is still our biggest drawcard.

Adelaide is continuing to establish itself as an attractive option for investors across the country. As the tortoise and hare tale goes, slow and steady wins the race... and it's exciting to see Adelaide take its stride.

No comments: