Property Market Update for High Net Worth Income Earners

This article has been written for high net worth professionals, business owners, and partners and directors of professional services firms, including law firms. It provides you with an update on the property market and recommendations for investors in this space. 

Brisbane property market - update for investors

At present, the median house price in Brisbane is $475,000 compared with $773,000 in Sydney and $527,000 in Melbourne. This level of "affordability" is sparking some interest from southern investors. 

New infrastructure and the 2018 Commonwealth Games is also sparking interest with the Gold Coast apartment market, especially with Chinese investors. Over $600 million worth of development sites have been sold to Asian-backed buyers in the last year.

The latest BIS Shrapnel report predicts Brisbane’s median house price will grow by 13 per cent over the next three years while apartments will rise by six per cent.

However ...

While this situation sounds promising, we are wary of real estate for the time being for the following reasons:

• On the commercial side there are big vacancy rates in the CBD
• The downturn in the mining sector has affected leasing markets, and this impacts rent rates and vacancy rates
• Brisbane has one of the highest, if not the highest vacancy rate in Australia. Competition is fierce and incentives high
• There is potential oversupply in the inner-city unit market which will affect prices
• With slow wage and economic growth, pressure will build on prices in certain locations and asset type

Tips for Investors – residential 

• Location, location, location
• Only borrow what you can afford if rates increase by two per cent
• Do your homework on rental guarantees especially for off-the-plan purchases, and how this affects the valuation
• Find a good mortgage broker
• Talk to your accountant to make sure any asset purchase is in the right structure

Tips for Investors – commercial

• Location, location, location
• Do your homework on your tenant and make sure the lease is watertight
• Talk to your accountant to make sure any asset purchase is in the right structure
• Properties with multiple tenants - make sure you use a reputable property manager
• If in a strata titled environment, understand the body corporate rules and regulations to avoid unnecessary impact upon owner and tenant

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