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7 factors to consider when deciding where to invest in property

There is currently a lot of attention in the media on the timing of property investment.  Will the recent drop in interest rates kick off a further increase in the housing market, or will the tightening of banks help to level things off?  Although the focus is centered on entering the market at the right time, this can be a challenging and risky exercise.  There will always be a lucky few who pick the peaks and troughs in an investment market. However with the high cost of transactions in the property market, you can erode much of your gain by doing this. Property is a longer term investment, and where you buy is often more important than when.

We’re not going to give you tips on where to invest in Australia – locations and properties will vary depending on people’s individual circumstances. Instead, we’re going to examine the top seven factors to consider when deciding on what area to invest.

Is the area economically diverse?

The diversity of the local economy is crucial, and it’s best to avoid cities and towns reliant on a single industry. One of the key drivers of a property market is employment. If one company or industry provides the majority of jobs in an area and it takes a hit, it’s going to hurt your property investment. It becomes more challenging to find tenants, rents start falling, and you will likely struggle to sell the property.

What is the proximity to employment?

Continuing from the above point, you need your property to be within proximity to jobs. People generally want to live as close to their work as they can, balanced with cost and lifestyle. If the local economy is expanding, this creates more jobs and attracts more people, leading to greater demand for property.

What are the current and proposed housing supply levels?

The property market is driven by supply and demand. In some areas the population can handle a lot of dwellings, but there will be a point where excess supply in an area will drive down demand for property. If you’re buying a house with thousands of vacant acres next door, there is a good chance that land will be carved up and developed. Similarly, you don’t want an apartment next door to a block of 220 units, with another 180 units proposed across the road. Check with state and local urban planning policies to see what is planned for the areas you’re interested in.

How convenient are the transport links?

Knowing the local traffic bottlenecks and proximity to public transport will help you determine the liveability of a property.  You don’t want a property that has a 30-minute queue of traffic out the front door as it will deter potential tenants. Similarly, consider the distance to public transport and if your tenant will feel safe walking to access it at night.

What amenities are on offer?

If tenants can have a great lifestyle by being close to the gym and their favourite restaurants, you’re more likely to attract them.  While proximity to grocery shops is important, having quality cafés, restaurants, gyms and parks significantly improves rentability. Depending on the type of property that works for your strategy, you may also want to consider what schools are nearby.

Are you purchasing the right property for the area?

There is a lot of debate on houses versus units. If you’re buying close to the city, chasing lifestyle or after an affordable yield, it’s likely a unit will be better for you. If you’re looking beyond the city fringe, then a house is probably better suited to you. Either will work, but it’s a matter of getting the right property for the right area that suits your personal strategy.  A quality one-bedroom unit close to the CBD with water views will likely do well; but a small one-bedroom unit 45 kilometres from the CBD is a less sound strategy.

Are you buying for the long term?

There is a lot in the media on what is happening in the property market at any one point in time. However the media speculates less frequently about what is likely to occur in the longer term, simply because it’s not as interesting. Property is a long-term investment, and you’re likely to hold it for 10 years plus. By considering the recommendations above, you can start to form a picture of the long-term trends for what you’re looking to buy. Suburbs evolve over time, the economy will go up and down, and you need to find a property that is going to weather these changes. Choose a property that will have long-term desirability and it will always be in demand.  This plays out well for both renting and resale, which is ultimately what you’re looking for in a good investment.

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  • As COVID-19 continues to spread, we would like to take a moment to let you know what Financial Spectrum is doing to respond.

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