During times of uncertainty, astute investors often make the greatest financial gains - and 2020 would certainly count as a year of uncertainty. Whilst risk can lead to reward in investing, some risks are more calculated than others, especially when it comes to investing in property. There are a few good reasons why purchasing property in Canberra, for example, would be an excellent calculated risk:
1. The property market remains robust and buoyant. According to a recent ABC News article, “Since the onset of the coronavirus crisis in March, property values in Canberra have risen by 1.3 per cent.” In the same article, CoreLogic's head of Australian research, Eliza Owen, explained Canberra had not been as severely impacted by the pandemic as other cities. "The most resilient market has definitely been the ACT," Owen said.
2. Interest rates continue to remain at an all-time low, and there doesn’t appear to be any sign of this changing soon.
3. ACT Rental prices have increased over the last year: +4.5% for houses, whilst unit prices have held steady.
4. There is still a demand for rental properties due to stable employment within the public service and businesses who support government departments. Eliza Owen also told ABC News, "Jobs have been relatively stable in the higher paid sectors and in the public and safety and administration sector employment has declined less than one per cent”.
5. Interstate business travel to the ACT to support government departments will continue, even if it has slowed slightly due to the pandemic.
However, pandemic life means there are a few additional things to consider when purchasing a property:
1. Property type
The rental rate increase of 4.5% for houses over the last year would indicate this type of property is a solid investment. However, rental rates on units have also held, so now is an excellent time to start or expand your property investment portfolio.
2. Ideal tenant
The landlords most impacted by COVID have tenants who have been adversely affected by COVID. Even if a landlord personally has a secure job or source of income, COVID has had a ripple effect on our economy. It started with people in jobs where businesses were forced to close or change their business model – most notably the hospitality, entertainment, and retail industries, and has trickled through into other industries. Whilst there has been generous government funding through Job Keeper and Job Seeker, some businesses will not be able to recover, which will have a long-term impact on employment.
It has been difficult, near impossible for landlords to evict tenants if they can’t pay their rent due to COVID, but most banks have been generous in putting loans on hold for landlords facing this issue. It is important to note, this “pause” in mortgage repayments doesn’t mean the loan amount is reduced in any way. This measure simply extends the life of the loan.
Given the future uncertainty of the pandemic, it would be wise for landlords to carefully consider their “ideal” tenant going forward. Where once a landlord would look at a tenant’s employment to determine their ability to pay the rent i.e. someone with a full-time job vs. someone self-employed or working casually, it is also important to consider how COVID-proof their job is. Therefore, your ideal tenant may now be a full-time healthcare worker or public servant, for example.
Location has always been, and always should remain an important decision when purchasing property for personal or investment purposes. However, investing in property from 2020 onwards should also take into account where your ideal tenant works and desires to live. For example, if your ideal tenant is a healthcare worker, then properties in close proximity to a hospital or other health hub would be worth considering. Likewise, when targeting tenants who work in the public service, selecting a property close to their work and in an area where they would like to live and socialise is important.
If there’s one thing we’ve learnt from lockdowns (even though Canberra has fared well with limited COVID cases), it’s the craving people have for outdoor space when they can’t access it. Facing lockdown in a small apartment with no access to greenspace and nature can be extremely challenging. COVID has made us question our lifestyle priorities when lifestyle factors such as socialising in public spaces are limited or not permitted. What good is an apartment in the centre of town when all the shops and cafes are closed and you can’t leave your building?
In fact, the pandemic will make many city-dwellers (especially Melburnians) take a long hard look at their lifestyle and reconsider the long-term value (or cost!) of living in densely populated areas. It is likely COVID will initiate an increased trend of decentralisation from cities in favour of Tree and Sea-changes. So far, Canberra hasn’t been as adversely impacted by the pandemic as other cities, and is advantageously positioned far enough away from Sydney and Melbourne to isolate itself, should the need arise. Canberra also offers the perfect Tree-change opportunity, and larger blocks on the fringe of suburbia may grow in popularity - watch this space!
In a recent All Homes article, Jessica Taulaga points out this trend is already occurring, “The ACT had a net gain of 243 people in the three months to June, its largest quarterly net gain since December 2018, official figures show”.
Working from home has also become the new reality for many people, so having the space and a comfortable environment to work from is higher on the priority list for many. At the very least, landlords should look for properties with home offices and space for tenants to work from home when considering prospective investment properties.
4. Property extras
Astute investors always look for properties with the “X Factor”: a great view, well-positioned near amenities and services, on a large block, etc. Now more than ever investors should be seeking properties with features which will increase their investment over the long-term. These features could include:
a) Zoning – the ability to build multiple residential or commercial structures on the property. Whilst you might not develop the property straight away, this is an excellent option to have in the future.
b) Multiple occupancy – duplex properties or properties with a granny flat offering multiple occupancy on one block can future-protect your investment. Even if one property becomes vacant you still have an income stream from the other/s.
Low interest rates, coupled with the robust Canberra property market and a dash of creative thinking is the recipe for a successful property investment strategy. Once you have considered your options, take the next step and reach out to our team, who can get on your path to property success.