Real estate investors have a limited chance of capturing some of the inner-city housing markets in Sydney, Melbourne and Brisbane before prices go through the roof again.

While the substantial impact of the COVID-19 pandemic on inner-city markets is undeniable, McGrath founder and executive director John McGrath said these securities create a “rare” opportunity for real estate investors and buyers.

“In the grand scheme of long-term ownership, COVID-19 and its associated effects are short-lived. This makes downtown apartments a once-in-a-lifetime value purchase,” said Mr. McGrath.

Why the conditions in the city center are ideal

Mr. McGrath believes that restrictions on overseas migration, which have put an end to demand from foreign buyers and tenants, have changed the dynamics of inner-city markets, opening them up to potential buyers.

“Local buyers have little competition from foreign buyers and new immigrants, with Australia’s international border currently expected to remain closed until 2022, so savvy first movers are seizing the opportunity to buy inner-city apartments,” he said.

In addition, first-time homebuyer activity in these markets is beginning to decline, allowing return investors willing to look beyond the short-term problems of higher vacancy rates and lower yields.

“While the value available to CBD apartment buyers is clear, many people don’t realize that the impact of the pandemic has extended beyond the CBDs to the suburbs of the inner ring within a 10 km radius.”

Some local government areas (LGAs) in Sydney, Melbourne and Brisbane have either recorded or maintained declines in apartment prices over the past year.

Opportunity to buy positively aligned properties

Mr. McGrath said current market conditions offer investors a rare opportunity to buy positively aligned or cash flow investments.

“It is usually achieved after years of loan repayment to bring the cost of ownership below the rental income,” he said.

In fiscal 2019, nearly 60% of Australia’s 2.2 million real estate investors reported losses, making negative gearing the norm.

However, Mr McGrath said low mortgage rates are changing the game.

Sydney’s gross apartment yield is 3.1%, Melbourne 3.5% and Brisbane 5.1%8, while the average interest rate on a variable investment loan is 3.02% or 2.38% fixed for three years,’ he said. he.

“Local owner-occupiers and investors have a unique, time-limited opportunity to use the closed-border advantage to buy property in FY22, before life returns to normal and we see a projected increase in both rent and rent. capital value in our inner cities.”

Photo by Ivan Tsaregorodtsev on Unsplash

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