Looking to invest in an investment property? Here are the top five reasons why investing in the Perth property market is a smart decision.
1. Capital Growth is a good reason for somebody to consider any investment. Property historically has always performed well since records have been kept to measure growth. Although property goes through cycles and there are booms and busts, property should be purchased with the view of long term investment – over 5 years, then records show that you should benefit through capital growth.
Location is a major contributor to Capital Growth. Properties that are close to public transport, schools, hospitals, shops and employment opportunities tend to have a greater capital growth once these attributes have been established. If your property purchase is based on investment only, and your intention is to rent out the property, you should ensure the area has all these commodities.
2. Rental Yield is a term used to measure the yield that a landlord can expect to receive in rent, expressed as a percentage of the purchase price of the property. Because the demand for rental properties is high in Western Australia especially in the metro area, rent prices have increased dramatically over the past couple of years, and should continue to do so until enough rental properties can be built to accommodate the demand.
The good news for investors is that even though the State Government and Private Investors are working hard to create more rentals properties, the reality is that that there is not enough land available to satisfy the needs of investors and owner occupiers. Whilst this situation exists the lack of rental properties will not be satisfied.
3. Rental Vacancy Rate is the number of dwellings rented out compared with the number of available dwellings for rental on the market. SQM founder Louis Christopher said Australia’s capital city rental vacancy rate was 3.5 % in March. Rental markets in Perth are sitting at just 1.1 % vacancy rates. A three per cent vacancy rate is widely considered to represent a balanced market.
With the Rental Vacancy Rate being low, Western Australia is a sound place for an Investment Property, and this statement is backed by the large number of Eastern State Wealth Creation Companies starting to enter the Perth Market.
4. The Ongoing Resource Boom has increased the numbers in migration and immigration to the State, with people seeking opportunities to cash in on the boom. With an ongoing influx of people looking for accommodation the demand for rental properties is placed under more pressure.
Whilst this situation exists, and there is no sign that it is going to change, it puts Western Australia on the shopping list for investment properties.
5. Supply and demand is the most fundamental concept of economics and it is the backbone of a market economy. With the demand for housing in Western Australia high, and the supply for both rental and owner occupied properties low, investing in Western Australia make economic sense.
Before you decide to make any decisions in regards to investing, you should seek financial advice from your Accountant or Financial Planner to ensure that this is the correct strategy for you.