Survey says Perth, Brisbane are the new investment hotspots

CONFIDENCE is returning to the Perth investor market following improving rental market conditions.

A survey of 483 investors across Australia by property investment consultancy Momentum Wealth identified Perth and Brisbane as the new investment hotspots, with 36 per cent and 33 per cent of respondents respectively highlighting the capital cities as the best places to invest.

Buyer’s agents team leader Emma Everett said a combination of affordability and potential growth opportunities had likely contributed to higher levels of investor interest in these markets.

“While both markets offer strong levels of affordability compared to Sydney and Melbourne, they also hold promising opportunities for long-term growth, with Brisbane already experiencing overall price growth and areas of Perth performing strongly as the market enters its recovery,” she said.

Ms Everett said investors looking to take advantage of current conditions would need to remain vigilant in their property research and selection.

“In these early stages of recovery it’s not uncommon for different areas of the market to experience price growth at different times, so investors will need to remain diligent in their research to ensure they are selecting an area that aligns with both their investment strategy and growth expectations,” she said.

While Perth was considered the best place to buy among overall respondents, the survey also highlighted a considerable rise in local confidence, with 70 per cent of WA investors finding it to be the most appealing capital city to invest in.

This was a 4.5 per cent increase on last year’s results, when the proportion of WA respondents preferring Perth jumped 29 per cent on the previous year.

Ms Everett said renewed confidence was already leading to price growth in some areas and investors looking to buy in high-demand suburbs would need to move quickly or risk entering the market when competition levels had already picked up.

“We are already seeing significant evidence of this in some areas of the market, with increased activity from trade-up buyers resulting in significant price growth in Perth’s central sub-region across the past 18 months,” she said.

Although market confidence had increased, there were still barriers to investing, including difficulty in securing finance.

The survey showed 67 per cent of respondents had reviewed their loans in the 12 months to November 2018, up 8 per cent on the previous year’s results.

Mortgage broking team leader Caylum Merrick said in the current challenging lending environment in particular it was vital investors conduct regular loan reviews to ensure they were still receiving the best rates and products to support their investment goals.

“Whilst we’ve seen record low interest rates in recent years, we’ve also seen a number of buyers impacted by changing lending restrictions,” he said

“With many banks now raising their interest rates outside the RBA cycle, it’s more important than ever that investors keep their finger on the pulse.”

The potential changes to negative gearing proposed by the Labor government posed a further source of uncertainty for some investors, with 61 per cent of respondents having a negative cash flow portfolio.

Ms Everett said while investors who relied heavily on the tax benefit would need to be mindful of the impact of such changes, it was important they remain focused on the fundamentals during the property selection process.

“While negative gearing provides a useful tax benefit for those with a negative cash flow portfolio, investors need to remember that tax offsets only form a small portion of a property’s overall returns, and that factors such as land value, location and tenant appeal remain critical to a property’s performance,” she said.

“Investors who get these fundamentals right from the start will be better placed to weather potential changes and short-term volatilities in the market.”