This is a question that property investment experts are posed on a regular basis by investors who are new to the market. The answer is that, while there is no guarantee of healthy long term returns in any type of investment, there are certain locations for property that are riskier than others. According to recent data, these areas include outer suburbs, semi rural and rural regions. While they may seem cheap and potentially a good prospect for first time investors, there are good reasons why professional property investors in general stay away from purchasing properties in these areas.
The main reason why outer suburban, semi-rural and rural locations will be less attractive to property investors include the fact that they simply have lower populations and density, meaning that there will be less demand for housing and subsequently lower rental income from property. An Australian Bureau of Statistics (“ABS”) report this year found that the median rents had increased most in the inner city suburbs of major capital cities, with semi-rural and rural areas recording the lowest gains overall.[i]
The other areas that experienced higher increases in rental income included outer suburban and semi-rural areas in Western Australia and Queensland, due to higher wage increases for those employed in the mining and construction industries. The issue for landlords in these regions is that a predicted downturn in these industries could see the end of the current high demand for workers and for housing and a lowering of rents. A substantial decrease in demand could also affect the value of your investment property if you were unfortunate enough to have to sell during a downturn. This makes buying a residential investment property in these suburbs a far riskier proposal than in the inner city where there is predictable population growth and sustained demand for rental properties.
The advantage of major capital cities such as Sydney, Melbourne, Brisbane, Perth and Adelaide is that people will always be more attracted to places where they can get jobs and have access to transport, education facilities and entertainment. According to experienced property experts such as John McGrath from McGrath Estate Agents, demand for inner city apartments – and especially brand new developments which make popular property investments – shows no sign of slowing in the near future, with growth predicted at around 5% to 10% over the long term. The old adage of “location, location, location” could not be more true for investment properties when looking at the differences between inner city suburbs and rural regions.
If you are thinking of purchasing a residential investment property and have questions about the best possible areas to invest in, contact a property investment expert such as Ironfish. They offer a wealth of experience in relation to inner city properties and in particular off the plan developments. They have a team of dedicated professionals who can assist you with the right research and industry knowledge and even give you access to exclusive one-off pre-negotiated deals that will turn your investment dream into reality!