Considering an interstate investment? ‘Be careful’ of following only price

By Lucy Dean

November 16 2017
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Interstate property investment can present some “bright points”, but investors need to factor in more than just price points when making the jump, a property consultant has said.

Wealth adviser at WealthMart Steve Smith argues that property investors who only look to their immediate cities may be “short-sighted” and should consider opportunities further afield. However, in doing so, investors need to focus on more than just “compelling” price points.

Speaking to Nest Egg, Mr Smith explained: “People are a little bit despondent because they haven’t been able to purchase into Sydney and then a lot of people won’t do any research outside of their home state.

“We think that’s a little bit short-sighted because there are different property cycles across the Australian economy all the time and if you believe you’re locked out of somewhere, it’s worthwhile seeking the right advice to help you find opportunities in other states.”

Investors considering an interstate purchase need to be aware of what is occurring in their target areas and can do so by seeking out the “experts in those locations”, Mr Smith advised, emphasising that the experts need to have proven track records.

The second step is assessing the vacancy rates. “Low vacancy rates is always a good indication of how an area is performing,” he explained and noted that there are “quite easy” ways for investors to access this information online.

“We also look to where there’s good infrastructure going in, where the state has made a good investment in a particular area that should help to develop that location on the back of the infrastructure going in. We think that’s very important.”

On the other hand, investors need to watch out for high vacancy rates. Mr Smith pointed to Brisbane in particular, warning that while it’s being “promoted fairly hard at the moment”, its high levels of oversupply in the metropolitan regions means investors should be “very cautious”.

“It’s really about doing your investigations, finding out who the experts are in a particular area and going to consult with them, look at their testimonials around their success and choosing them on that basis.”

He continued: “It’s very hard to try to be an expert in a different area yourself and we should be very careful about buying in another state just because the price point is compelling alone.”

Canberra a ‘bright point’

Brisbane may be a tricky area, but Canberra is one investors should have on their radar, Mr Smith said.

Calling it a “bright point across the nation”, he said Australia’s capital has experienced a solid 12.9 per cent growth rate in house prices over the last year.

“The good thing about it is it is very well price pointed. We’ve seen some one bedroom stock for $350,000 with rental returns likely to achieve between $380 and $400 a week, so it’s quite compelling from a rental perspective, low vacancy rates and good stable employment in Canberra.”

WealthMart is planning to launch a campaign which hopes to “shift the mentality” of both first-home buyers and would-be investors.

According to Mr Smith, the #youcan campaign came about because: “We find that people are despondent and they are putting their heads in the sand and we just want to reinvigorate them and say: Listen, there are opportunities to buy property portfolios.

“That’s not to say that property will always be successful - it can be positive and negative - but particularly over the longer term, if you’re willing to hold, it’d be unusual for you to lose money on property.”

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