Favourable spot for VIC investors

By Gerv Tacadena | 28 Aug 2020

Investor demand in Victoria is predicted to soften over the coming months due to the COVID-19 shocks on rental property. However, the current conditions in one property segment will likely remain favourable for would-be investors, according to the quarterly review from RPM Real Estate Group.

Land is going to be a good investment vehicle for investors planning to have a slice of the state's property market, said Lynn Nie, division manager at RPM.

"Lending rates are at historical lows and investors in this space will not require a tenant for around 12 months as land is settled and built upon," she said.

Investing in land, as Nie puts it, is a long-term investment strategy, especially given the current situation of the rental market.

"By the time the investment property is ready to lease, international travel should be moving back to normal, or at least the 'new normal'," she said.

The onset of the COVID-19 outbreak in March has already softened investors' share of overall lot sales. In fact, investor lot sales accounted for only 23% of overall turnout in the March quarter and 15% in the June quarter.

While it remains a favourable time for investors to buy land, they will likely face competition from owner-occupiers who have plans to take advantage of the HomeBuilder scheme.

"Nevertheless, for those investors who do buy during the coming months, it is likely to be an excellent investment in the medium term given the current low lending rates projected to remain for years, and the large number of available lots on the market," Nie said.

On the other hand, the outlook remains gloomy for the rental market, which has been more heavily affected than the buyers' market amid the pandemic.

Nie said renters in the state are typically younger and are more exposed to sectors impacted by lockdown restrictions. The conversion of short-term accommodation to long-term rental has also contributed to the softening of the market.

"Rentals in the inner ring will be hit hardest for the remainder of 2020, impacted by the shift of short-term accommodation onto the permanent rental pool and significantly lower migration and international student numbers," she said.

Nie believes that this period of uncertainty will influence how investor demand will impact prices and construction activity over the next few years.

"However, for investors looking to get a foot in the market, it is worth looking at macro drivers and considering a long-term term view of strong overseas migration," she said.

Top Suburbs : midland , bligh park , cardiff south , collingwood , menai

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