At this time last year, very few people could have predicted the way the property market has grown. However, the latest data from CoreLogic shows that there have been historic rises in dwelling values across the country, with price growth in the quarter to April 2021 the highest since December 1998.
Despite all that has taken place over the last 15 months or so, confidence is high and all current predictions are that prices will continue to rise throughout this year and well into 2022, at the very least.
All the data would therefore suggest that, despite all expectations at the onset of Covid-19 at the beginning of 2020, now is actually the ideal time to invest in property and benefit from the capital growth potential that is currently available.
Where can I invest in capital growth properties?
According to CoreLogic, national home values grew by 6.8% in the quarter to April 2021. In the year to April 2021, they are 7.8% higher, the largest recorded growth in a twelve month period, which is thought to be largely driven by owner-occupiers and first home buyers entering the market.
This was accompanied by a 22.6% increase in sales volumes over the same period, and a proportional uplift in investor financing for property purchases in March 2021 in all states and territories (except ACT).
The best performing capital cities included average price rises of 5.6% in Brisbane, 5.8% in Melbourne and an impressive 8.8% in Sydney. However, while the data shows us that there are opportunities all over the country and capital growth properties are available in all capital cities, it is in regional areas where the capital growth rate could be most significant going forward.
For instance, in regional Queensland, home values in the April 2021 quarter rose by 6.1%, while the rises were 7.1% and 7.4% in regional Victoria and NSW respectively.
In short, the overall market picture is that there haven’t been opportunities for regional capital growth investment like this in a generation.
Why should I invest in regionalareas?
Despite there being similar percentage rises in house prices in capitals and regional areas of the country, it nevertheless remains the case that it is more affordable to buy property outside of capital cites.
At the same time, however, this doesn’t mean that investors can afford to wait on taking up regional capital growth property investment opportunities. As a result of covid-19, demand in country areas has clearly increased (as witnessed by the significant price rises detailed above), as people currently living in larger cities look for more space both indoors and out than they might currently enjoy in crowded urban areas.
This means that going forward, the best suburbs for capital growth are likely to be located outside of our major urban conurbations, as the demand in the regions fuelled by the onset of covid-19 is not likely to diminish any time soon.
Therefore, to take advantage of a solid capital growth rate in regional property, it makes sense to invest now before prices rise even further over the next year or so.
Rise in regional rents
There has also been a commensurate rise in national rent values over the same period, including 10.9% in regional Queensland, 6.8% in regional Victoria, and 9.0% in regional NSW, where the most popular regions are expected to outperform even the Sydney property market.
As rent values rise, however, there has been something of a downward trend in rental yields over the same period (as is always the case when rents go up). Average yields (as at April 2021) are 5.1% in regional Queensland and 4.1% in regional Victoria, while average yields are at 4.2% in regional NSW.
Therefore, if you are looking to buy in regional Australia, in the current boom market you are better off looking at capital growth properties that will produce returns over the longer term (despite the fact that ultimately you may be liable for capital gains on investment property), rather than seeking to invest in positively geared,high yield investment property that produces small returns in the short term. This is because yields are not expected to rise in any significant way while rents continue to increase in value as they have been doing.
Now is the time to take advantage of capital growth property investment
With interest rates at historic lows, and the Reserve Bank saying it expects no significant rises until 2024, there are numerous opportunities for capital growth property investment all over the country.
However, some intervention by authorities to slow down the boom should not be ruled out. Actions such as restricting low deposit (high Loan to Value ratio) loans or limiting investor finance loan to value ratios to 80% are not impossible, so this should also encourage those who are thinking of investing to do so now in order to take advantage of the current exceptional (and, as some argue, unprecedented) favourable conditions.