As the Australian residential property market continues to perplex, BRW asks property experts on the best way to play the current environment.
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Tread carefully through hype in the Melbourne apartment sector
Wakelin Property Advisory director Monique Sasson Wakelin is advising her clients to be particularly wary of Melbourne’s new apartment sector, which is widely thought to be over-supplied. There has been a surge of spruiking and property investment seminars, she says, much of it targeted at self-managed super funds.
“Investors need to be exceptionally wary,” she says. “It is cloaked very cleverly in what looks like advice. But really it is just clever sales technique.”
The downward slide in buyer confidence and home prices has slowed, she says, and auction clearance rates in Sydney and Melbourne are higher than last year. But buyers remain cautious.
With the market weak, she advises investing in safe properties and taking a long-term view. Houses in desirable areas are the safest. If the buyer can’t afford a house, established apartments (not new) in small blocks (not high-rise), are most likely to hold their value.
“It’s never a case of categorically staying out of the market,” she says. “It’s not about picking your time, it’s about picking your asset.”
Sydney CBD apartments are worth a punt because supply is maxed out
Property investment adviser Chris Gray says his bank was more than happy to refinance 11 properties he owns through Sydney’s eastern suburbs. They had gone up in value by a combined 4.25 per cent in the past 18 months – not bad considering how weak the housing market has been.
He likes median-priced two-bedroom apartments in inner-city areas like Kirribilli and Bondi. In good times they rise in value, and in bad times they fall less than luxury houses or homes on the city fringe or in regional areas.
“They’re in areas where there is no more supply of property because it’s fully built up,” Gray says. “There is plenty of demand from young professionals, and no one is selling because young professionals still have their jobs, so prices are stable.”
The same principle applies to the properties he owns in Britain, he says, which have held their value.
“The equivalent on equities is buying BHP and bank stocks.
“They won’t double overnight, but they’re nice and consistent, and you will never get them cheap.”
A good way to suss out an area is to ask a valuer or your bank, he says. “During the boom in 2003, the banks didn’t like Pyrmont because there were so many new buildings, so they would only lend 80 per cent. That is a massive flag saying ‘there is danger here, only invest if you really know what you’re doing’.”
Living in a lower growth market
Catherine Cashmore, a property commentator and buyer’s agent with National Property Buyers, says buyers need to adopt a “low-growth mindset”, and assume future value gains will be lower than those of the past. This means ensuring they can hold property long term without leveraging to the hilt, rather than buying and assuming they can sell it for more in a few years.
“We really had our golden years of boom growth over the last decade, and that’s not likely to continue,” Cashmore says.
Property is likely to track inflation or wages growth, she says, making it a good buffer against inflation.
She advises buying established properties and steering clear of high density developments. “Usually new accommodation, particularly units, is poor-quality accommodation built with investors, the rental market and mostly the student market in mind.”
City fringe locations are risky because new land releases reduce the scarcity factor, she says.