I was at Resimax’s Property Power workshop recently. I think there were close to 100 pax in Intercontinental Hotel in KL. Learning as much as we could before we start investing is an important step, especially in a country where the currency is 3 times ours. I enjoyed the session because I learnt many new things I did not know about Melbourne property market. The main speaker, Ken Dodds shared something important that buyers must consider before buying any overseas property, in this case Melbourne property investment. Here are four important points we should note.
Property Investment is about People. Demand will have to come from population growth. State of Victoria attracts the highest number of new population. In terms of actual number, it was over 137,000 people in 2017 alone. If we look at a ratio of 3 to 1 home, that means up to 46,000 new homes had to be built to cater to this new. As a young city, Melbourne is home to over 4.9 million people. As per invest.vic.gov.au, “The number of people living in Melbourne increased by over 450,000 in the five years to March 2016, the largest increase of any Australian city.”
Buy what locals buy. Ken shared that it’s very important for foreign buyers to buy what the locals would buy. For example, foreigners are restricted to buying new properties. Many are attracted to smaller units of high-rise but if we were to ask the locals about their preference, it will be landed homes. These landed homes would usually be in suburbs but because of the expressways and rail, they are easily connected to the city centre. Australian families prefer to raise their kids in a neighbourhood with amenities and a community. In fact, if we look at selling the property many years later, it will be far easier to sell it to the locals if we bought what the locals prefer in the first place.
Buy where the locals could afford. The median home price in Melbourne is over AUD700,000. (Latest prices here) it’s not a price level which could be easily affordable to locals. The median income for full-time workers in Melbourne is AUD65,000 and if we calculate this as a household, it might be AUD130,000 per year. Here’s that report.At this income, the median property price of AUD700,000 is categorised under ‘Severely Unaffordable’ or 5.4 ratio. This is the reason why when we buy a property for long-term investment in Melbourne, it’s much better to buy at price levels which are lower. This will make the investment much safer because we need the locals to be able to afford the property we bought in the future.
A long-term development plan is needed. It’s easy to just pick a popular area and buy but when it comes to investment, it’s far more important to understand where we are buying and who we are buying it from. We should ask a lot of hard and tough questions about the area we are buying to the developer. Are there good connecting roads? Are there good schools? What about the connectivity via rails? In Australia, the developers could not tell you that ‘it depends on the government’s approval.’ Everything they tell you must have already been approved and they must show you the approval plans. Ask for them!
There are more things that Ken shared. There’s even an easy a 7-elements of a hotspot which I will share in my next article with all of you. If you want to know when’s their next Property Power workshop, visit their Facebook page here.
Ken will continue teaching property investment strategies and finance solutions in his up-coming seminar on 27th October. This free property investment workshop is of great value to seasoned as well as first-time
investors. Click here to register: https://propertypower.resimaxg
In the meantime, happy reading and understanding.
written on 28th September 2018
Next suggested article: Expert Series with Ken Dodds about the Melbourne property market investment