The changing face of property investment

The days of large capital gains may be over, but new opportunities are emerging in Australian market

The changing face of property investment


By Madison Utley

According to a national property developer, Australians need to accept the days of dramatic capital gains via property investment are well and truly over in order to capitalise on the new trends that have developed.

Urbex GM of realty Craig Covacich explained, “There’s a recalibration in the Australian residential market. Capital growth at great rates per annum are gone. Investors might see moderate growth over time, but I think the days of very large capital growth rates in a short period of time are at an end.”

Covacich used the city of Cairns to illustrate the “shifting dynamics at play.”  

“First and foremost, young people don’t need to work in an office anymore. The information technology allows you to work from home,” he explained.

“The second is there’s a new trend in the Australian population growth forecast, particularly in coastal cities, whereby the younger markets actually don’t want a full-time job. They’d rather have a couple of part-time jobs. That equals renting accommodation.

“And, if you are going to buy accommodation, it may well be cohabitated homes to share with another couple or another three or four people. It’s more like the old boarding house mentality.”

This is a radical shift in the composition of the housing market and its participants.

“The whole demographic profile and what they want are changing. The DNA of Australian real estate has been you buy a home for you, your wife, your two kids. After a few years, you might buy another one and rent it out. That’s no more.”

According to Covavich, there’s a “new world emerging” in Australia, following similar patterns already established in Europe and the United States.

However, despite seeing large capital yields as being an unlikely outcome, Covavich is certain there is still a market for investment.

“Out of this change, opportunities arise. If an investor is in a position to get a mortgage, I think it’s still a great proposition – not for capital growth, but for stable rental yields.

“If you are investing in real estate in Australia, you have to consider the type of dwelling in light of the new trends. It’s all about rental yields now. The question becomes how many rooms can you rent out of the home?”

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