29 | 04 | 20
The coronavirus (COVID-19) has forced innovation for the property industry at a rate of knots. Instead of months, it has taken only a few short weeks for changes to the property selling process to kick into gear. Inspections are now virtual, auctions are online and video calls are the new face-to-face meeting.
For some investors with a long term view or who simply subscribe to the ‘safe as houses’ adage, they may be more drawn to bricks and mortar right now, but what are the right questions to ask to help guide your decisions?
We’ve gone to the experts – including economists, property agents and industry leaders - and using Woolooware Bay as a test case, we’ve drawn out the top 8 questions any investor – whether buying for the first of 101st time – should ask. See below the responses we received.
‘Desirability’ is an inherently personal assessment. But when considering from an investment perspective, buyers need to put themselves in the shoes of their future tenant. Who would live here and why would they love it?
The current era of social distancing and isolation may have changed the way we’re interacting and experiencing our home environment, but some qualities remain constant and there are probably some new considerations – like the quality of a suburb’s broadband connection.
Colliers International’s Ian Bennett recommends checking what makes an area traditionally popular – it is because of its natural or geographic beauty, its food and coffee scene, access to the essentials like employment, schools, hospitals and supermarkets or does it have an abundance of outdoor spaces for exercise.
And once social restrictions are lifted and people are travelling and commuting again, things like access to public transport and major roads should be top of mind.
The more in demand a suburb is, the better the chance of attracting good tenants at a good rate.
At Woolooware Bay for example, when complete the town centre resort will offer everything a resident could want within walking distance – shops, a wide range of restaurants and cafes in a waterfront location, a leagues club, gyms, office suites, serviced apartments, playgrounds, foreshore parklands, and a network of cycle and walking tracks along the waterfront.
Not to mention the employment opportunities with hundreds of new jobs in construction, hospitality, retail, services and maintenance on the cards.
Rental yield is the estimated annual rent as a percentage of the property’s market value, i.e. annual rent ÷ value of the property x 100.
In metro areas gross rental yields typically range from 3-5% [source: CoreLogic Hedonic Home Value Index, May 2019 Results].
Can you get more for your money a few kilometres away from popular suburbs?
For example, Woolooware when compared to Cronulla delivers a better yield according to figures from CoreLogic’s suburb profile. In October 2019, the median unit price in Cronulla was $790,000 compared to $750,000 in Woolooware, but with a rental yield of 3.3% and 3.8% respectively.
Just as important a consideration as rental yield, capital growth is a key metric for investors. Look at the growth over five and 10 years. And also see if the growth has been only modest, how your chosen suburb performed compared to its neighbours. In a challenged market, if it’s held its ground, or shown resilience in the face of declining prices, that’s a good sign.
PRD Chief Economist, Dr Diaswati (Asti) Mardiasmo says Woolooware is a premium market when compared to the rest of the Sutherland Shire and Greater Sydney, having recorded a higher capital growth over the last 10 years.
"Yes, the market has softened in the past 12 months, however the rate of price decline [in Woolooware] is not as steep as the Shire and Sydney. This means the area is quite resilient."
Supply and demand is affected by many factors including infrastructure, new hospitals or schools, population growth or decline, and general trends in where people want to live.
The key here is whether your investment option is rare or sought-after.
"The rarity of the resort-style town centre at Woolooware Bay should be a major consideration for investors,” says Highland Property Group Sales Operations Manager Luke Barbuto. “There’s nothing quite like it in the Sutherland Shire and its location on the water means it will hold its value."
Vacancy rates calculate the number of rental properties on the market vs rental properties occupied.
Lower vacancy rates mean there are fewer rental properties or higher demand for rental properties – typically good news for landlords.
In Woolooware, vacancy rates have declined sharply over the past 6 months, a factor which PRD’s Dr Mardiasmo says “further confirms there is high rental demand in the area and room for more investment”.
Dr Mardiasmo says an ideal location would have new commercial and infrastructure works on the near horizon, indicating increased job opportunities and improved liveability.
Woolooware Bay is already serviced by key infrastructure like public transport, schools and hospitals and extensive roadworks now underway will improve access and safety for cars, buses, cyclists and pedestrians on one of the area’s main arterial roads, the busy Captain Cook Drive.
With purchasers demanding confidence in their investment like never before, groups such as The Urban Development Institute of Australia (NSW) has a new Building Regulation Advisory Panel in place to support regulation that restores trust in the industry.
In addition, smart developers are sharpening their finishes and upping the ante when it comes to quality assurance.
"It’s no longer enough for either a builder or developer to lean on their size or reputation,” says Aoyuan International’s Deputy Development Director Matt Crews. “We need to prove our commitment to quality and be completely transparent. The level of repeat and referral buyers at Woolooware Bay speaks to the attention to detail here."
If your taste runs to the brand new over an older, established apartment, how do you know that you’re making the right off-the-plan purchase?
Make sure to ask the sales team for the developer’s track record, including what they have delivered to date, how they treat their customers, how they deal with the move in process, how they choose their builder, what they need (e.g. approvals, finance, presales) to commence and what the timeframe is.
It is important to consider all the different factors in your investment decision, and most importantly how they fit with your personal circumstances. Although the area you’re considering or the property itself may not score 10 out of 10 in every aspect, the more homework you do, the better position you’re in to make a smart and informed decision that will pay long-term dividends.
DISCLAIMER: All details, images and statements are based on the intention of, and information available to Aoyuan Property Group (Australia) Pty Ltd and its related bodies corporate (together, Aoyuan International) as at the date of this email and may change due to future circumstances. This email is not legally binding on Aoyuan International. Aoyuan International does not give any warranty in relation to any information contained in this email. Aoyuan International does not accept any liability for loss or damage arising as a result of any reliance on this email or its contents. Testimonials containing the views and opinions of individuals does not represent the views of Aoyuan International. Information provided is general in nature and should not be relied upon without consultation of an independent and qualified professional taking into consideration personal circumstances.
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