MAY 21, 2018

West Australia investor confidence on the rise


Perth property investors are gaining confidence in the WA property market, latest reports indicate.

WA’s sluggish economic performance has led to a stagnant real estate market in recent years, however the tables are beginning to turn.

Perth property experts Momentum Wealth have revealed that 67% of WA investors believe that now is a good time to purchase an investment property. This is a substantial increase of 29% on last year and demonstrates a visible increase in investor confidence.

These findings were based on Momentum Wealth’s annual survey of over 400 property investors across Australia, designed to capture the latest investment trends and preferences.

Invest in the West

Investors also indicated a strong preference towards investing in Perth, as opposed to other Australian capital cities or overseas, which reflects the growing confidence in the WA economy.

The WA Chamber of Commerce and Industry (CCI) announced in January that the WA economy is the strongest it has been in 4 years.  CCI Chief Economist Rick Newnham forecasted a 0.9% growth this year and said CCI was “confidently optimistic about the future.”

Mr. Newnham also observed that the State’s diminishing oversupply of housing, combined with an expected reduction in the number of people migrating away from WA, is a positive indicator that the real estate sector is likely to gain traction over the coming months.

In recent months, stock levels in the WA property market have been on the decline, while buyer activity is on the up – a positive sign that the market is in recovery.  The West has also recently reported on signs of an economic resurgence, with mining, agriculture, real estate, fishing and forestry, and the education and training sectors listed as the key drivers for economic growth over the next 12 months.

That said, it is unlikely that the property market revival will resemble that of the boom times of the early to mid-2000’s.

Buyer’s Agents Increasing in Popularity

The Momentum Wealth survey also signalled an increasing popularity in the engagement of buyer’s agents among investors, with the number of investors using their services increasing by 4% over the past year. Investors are recognising the importance of engaging a buyer’s agent when seeking a property which will consistently outperform the market over the long-term.

Interestingly, 68% of investors who engage a buyer’s agent have 2 or more properties in their portfolio, whereas overall only just over 27% of investors have exceeded 1 investment property purchase. This suggests that the more successful property owners invest in the services of a buyer’s agent – which represents the value of their services.

Goal is Long-Term Capital Growth

A whopping 62% of survey respondents cited long-term capital growth as their investment strategy, with 19% investing for cashflow and just 7% investing for short term capital growth – or a property ‘flip’ – which is usually the result of a renovation project.

The practice of buying a property, holding it for a minimum of 10 years and then enjoying the benefits of capital growth is widely considered one of the safest and most common strategies among investors. This strategy can also provide a reliable income for your retirement years.

While there are no guarantees with real estate value, past property cycles all indicate that a property should increase in value over a 10 to 20-year period.

Financing a Stumbling Block

However, a stumbling block which investors are currently facing is the difficulty of securing a loan.

With the struggling economic climate of recent years and banks slashing their lending, buyers have been stalled from entering the property market. The market may be on the up, but the rate of lending is somewhat lagging.

These findings highlight the importance of engaging a reputable mortgage broker who is better equipped to acquire financing. A broker will work on your behalf to secure the best loan for your investment.

Commercial Property – Desirable, But Can Be a Challenge

The survey affirms that commercial real estate investment is a common objective among investors, who are attracted by the higher rental yields and long-term capital growth prospects. However, most investors are finding it difficult to secure a commercial property, largely due to the high cost of entry, and the complexities and extensive industry knowledge required to make a reliable purchase which will generate a strong return.

An increasingly popular path to securing a share of this lucrative market is to invest via a commercial property syndicate, or unlisted property fund. By pooling funds together, a syndicate allows you to invest a smaller amount of capital in a property, which gives you access to more expensive, higher yielding commercial properties which would otherwise be beyond reach.

Furthermore, by diversifying your portfolio, you are spreading your capital across various properties and tenants, thereby lowering your risk profile. Syndicates will also often purchase more than one property in different locations, further spreading your risk.

Investors are also allured by the fact that the property will be professionally managed, from research and acquisition, right through to lease agreements and ongoing maintenance. This, of course, comes at a cost, but this is usually outweighed by the time savings and hassle-free nature of the investment.

Momentum Wealth are quick to point out, however, that investors must do their due diligence to ensure that they select a reputable syndicator. What is their track record? Have they managed similar syndicates with successful outcomes in the past? Have they done ample research? How will the investment be structured and when can you expect to receive returns? And what is the debt gearing on the investment? According to Damian Collins, Managing Director of Momentum Wealth, these are all key questions which every investor needs to consider.

General Outlook

The attraction of reliable passive income and long-term capital growth, without the volatility of the share market, renders real estate a consistently popular investment choice.

Mr. Collins is confident that “smart investors can have a lucrative year,” providing they are guided by the right knowledge and research. Regardless of your investment strategy, or the type of investment property you are purchasing, comprehensive research is key to a successful investment journey.

Author Bio: Felicity Allen writes for property investment consultancy Momentum Wealth. Offering market leading research and advice on the Australian property market, the company helps clients accelerate their wealth through property investment by assisting them in the strategic planning, financing, acquisition, management and development of their commercial and residential investment properties. You can catch Felicity on LinkedIn and Google+.

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