For a property investor, the end goal is always profit. Whether you’re looking for short-term cash flow or long-term capital gains, you’re aiming for some kind of return on the investment you’ve made.
With dwelling prices in many Aussie capitals rising, a lot of investors are turning to regional properties, which are considerably cheaper than their metro counterparts. Buyers feel like they’re getting bang for their buck – without realising that it is accompanied by many big risks.
Capital cities are where it’s at if you want to make a smart investment that delivers profits over the long term. Here’s why…
First, capital cities are the centres of the local economy. Employment opportunities are generally concentrated here, meaning you’ll have access to a steady stream of tenants who are more likely to have good wages. The popularity of your suburb is often highly reliant on proximity to the state’s capital, and how easy it is for residents to get to the capital via driving or public transport. In regional centres, the economy can be more volatile, leading to mixed employment opportunities.
Second, capital cities are typically the commercial heart of the state, which means they’re well-stocked with amenities and entertainment. For instance, even in a falling market like Perth, the presence of major universities in certain suburbs ensures reasonable demand for rental properties, given the need for student accommodation.
Third, while capital cities may offer lower yields to investors due to stiff competition, they generate steady, consistent earnings over the long run. Regional properties have their boom periods during which an investor can make money, but these highs often don’t last for long, with vacancy periods more common. By contrast, capital city properties are always going to be in demand. Regional homes can also take longer to sell, which can be frustrating for investors who need to liquidate quickly.
Fourth, capital city dwellings are generally expected to appreciate in value over time as a result of consistent demand. This is something many investors have discovered, to their delight, in recent years, when they saw net worth soar by five or six figures in areas of Sydney and Melbourne, after only a short time of ownership. While this certainly won’t apply to all capital city properties, you can have more confidence in your ability to make a profit with a city-based property.
Fifth, and finally, any turnaround in a state’s fortunes will usually begin in the capital. If upside is on the horizon, city investors will be the first to reap the benefits. It eventually “ripples out” to the regional markets, but in the meantime they can deal with years – and even more than a decade – of low or backwards growth in the meantime.
Of course, the main barrier against capital city properties is just how expensive they are, especially in places like Sydney and Melbourne. Just being able to get a loan and save a deposit for such a big investment may be difficult, especially for a first-time investor. Nonetheless, there are always options to buy interstate, to embark on a joint venture, or to buy a smaller yet more affordable apartment in an inexpensive yet well-performing market.
These are just some of the factors you should consider when weighing up your next investment. At Think Conveyancing, we make sure we’re on top of the latest trends, news and changes that could impact our valued clients. Our lawyers are committed to delivering an exceptional customer experience to you, so for more information about how we can help you achieve your property goals, contact our friendly team on 1300 932 738. You can also contact us online here.