A new survey shows that half of Australia's property investors aim to grow their portfolio this year, although some markets are more in favour than others.
Property investors are ignoring growing rumblings about property price bubbles, oversupply, and cyclical downturns, with respondents to a new survey showing that half aim to expand their portfolios in the near term.
An Australia-wide survey commissioned by Momentum Wealth of 444 property investors, found that 53% of respondents said their main goal was to either buy an investment property in the next 12 months, or to develop an investment property in the next two years.
Momentum Wealth managing director Damian Collins said cyclical concerns of some sort are always in the property market to some extent.
“Successful investors who build large property portfolios understand the cyclical nature of property markets and take a long-term view when making their investment decisions,” he said.
Melbourne, Brisbane and Perth a better investment than Sydney at present
“Analysis from our research department shows that Brisbane, Perth and Melbourne offer plenty of good opportunities for property investors: Brisbane for its relative affordability, Perth as it nears the bottom of a down cycle, and Melbourne because the current upcycle has some way to go in selected areas,” he said.
“However Sydney remains highly overheated and we would caution anyone considering buying in this market to approach any investment there with high caution,” said Collins.
Collins told SCHWARTZWILLIAMS that if a price correction were to occur in Sydney or Melbourne, the effects are likely to be self contained, and not necessarily cause corrections in other cities.
Each property markets in each capital city "tends to beat to its own drum" said Collins, adding that "it’s influenced more by internal market conditions, rather than what is happening in other property markets."
"If a downturn was due to buyers realising that the markets had reached a peak then other markets would be less likely be affected."
But Collins said that if external factor were to cause a price correction, such as a rise in interest rates or some other national issue, then the impact could be more widespread.
The importance of understanding investment fundamentals
Somewhat surprisingly, the survey revealed house-and-land packages were the third most popular type of property investment.
“It shows that many investors still don’t understand the fundamentals of property investment,” said Collins.
"House and land packages are generally promoted heavily by developers through expensive marketing campaigns," Collins told SCHWARTZWILLIAMS, but more knowledgeable investors will know that they don't achieve the highest returns.
“While house-and-land packages are fine for lifestyle choices, as an investment they typically don’t provide the best returns because they’re usually on the urban fringe away from amenity, employment hubs and there’s a lot of surrounding supply available, all of which weigh on price performance,” said Collins.
Do locals know something about Sydney and Melbourne?
The survey showed that while a quarter of respondents thought Sydney and Melbourne were the best cities to buy an investment property in, locals of the cities were not so optimistic.
Only 23% of participants from New South Wales and Victoria said that now is a good time to buy an investment property in their respective capital cities.
On the other hand, 53% of respondents from Western Australia believe now is a good time to buy an investment property in Perth. And 50% of respondents from Queensland think that it’s a good time to buy an investment property in Brisbane.
See also:
How to invest in property, a time-line of the steps involved