As always, our advice is to buy your investment property when you are ready to buy. Trying to time the market to get a better price, waiting for new legislation or a change in government is fraught and may not get you the payoff you’re hoping for.
Capital growth vs. rental yield
When buying investment properties, there are generally two different strategies investors will be using. You can read more about the difference between capital growth and rental yield here.
In an upward market like we are currently experiencing, rental yield gets compressed and so you’re relying on long term capital growth. REIV reported this month that median rent for houses fell and units remained the same. We’re also seeing vacancy rates in Metro Melbourne sitting at 6.5 per cent at present. This doesn’t mean it’s a bad time to buy, you just have to be clear on what you’re hoping to get out of the purchase and whether it’s a short or long term hold. It’s unlikely to be a market to ‘flip’ in, but certainly not a bad market for negatively gearing and waiting out the capital growth.
Changes to premium properties duties
In the latest Victorian State Budget new land tax rates were announced for properties valued at $1.8M or higher. There was an introduction of a few exemptions and some new incentives for purchasers buying off-the-plan up to $1M, who will receive a stamp duty concession. We’re also seeing a new tax introduced for windfall gains – this is focused on any land that is rezoned from July 2022 onwards. Finally, an increase in stamp duty payable on properties valued at $2M or more of $110,000 + 6.5 per cent of the dutiable value over $2M.
Suffice to say, for some investors these additional costs may be a deterrent to invest in premium properties.
New residential tenancy legislation changes
For a thorough outline on what these new laws cover, click here. Basically, the laws heavily favour the renter’s rights over that of the property owner. Knowing this, it’s critical that investors are getting the right advice around the property they are buying and what their obligations are.
Is now a good time to buy an investment property?
All that might come off a bit negative, when the reality is property prices are rising at a rapid rate. This generally equates to an increase to your equity and asset growth. Property continues to be the most popular asset vehicle for Australians and as outlined above, there’s always going to be something happening in the market affecting property investors.
We’re certainly not trying to make buying an investment property look scary or overwhelming, it’s simply a case of it being critical that you’re informed, and you know what you’re getting yourself into. Got questions? Get in touch and we’ll explain the ins and outs of property investing.