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Property Investment Melbourne
What to consider when buying a new apartment in Melbourne as an investment
Strong population growth and increased demand for apartment living have resulted in low vacancy rates, higher gross rental yields and strong capital growth for new apartments in Melbourne. It is projected Melbourne’s population will grow to 5 million with over 284,000 new dwellings to be built by 2030 to accommodate demand according to the Melbourne 2030 Strategy and the Melbourne @ 5 million. Here are the important factors to consider when buying a new apartment for investment purposes.
Location
Melbourne always ranks highly as one of the world’s most liveable cities in the Economist Intelligence Unit's liveability poll. Apartment living has been embraced by Melbourne with residents who want to live near cafes, restaurants and be close to sporting, cultural events and the buzzing nightlife. Traditionally, new apartment developments are located in areas that have a high rental demand. It is important to investigate your desired Melbourne location and check:
- average rent and yield is of similar new apartments in the area
- capital growth of the region you wish to buy a new apartment in
- changes to infrastructure or new developments planned that may affect the new apartment you wish to purchase and
- estimated population growth and demographics of the location.
Remember investing in property is a long term strategy and the property market is a cyclical market so make sure you check previous reports as well as current reports and projected planning reports for the area.
Rental income and yield for your new apartment
Research rental reports in the Melbourne region you wish to buy an investment property in and find out the average rent for other similar new apartments. The greater the demand for your property, the higher the rent you can charge. Traditionally, new apartment developments are located in Melbourne regions that have a high rental demand such as:
- within 10kms of the Melbourne CBD
- access to nearby schools or universities such as the University of Melbourne or RMIT
- within a short distance to one of Melbourne’s many shopping precincts
- close proximity to one of Melbourne’s beachside suburbs such as Brighton
- located near restaurants and cafes such as Carlton
- near to public transport and highways and
- located in a region with a diverse industry and employer base.
The increasing population, demand for apartments and historic low vacancy rates in Melbourne is pushing the price of rent and gross yields to an all time high.
Capital growth
It’s important to research the capital growth potential of the area that you are planning to buy in. Historically, Melbourne’s apartment prices have been approximately 20-25% more affordable than Melbourne and the best performing apartments in terms of capital growth have always been within 10km of Melbourne. Capital growth in Melbourne may be affected by the following factors:
- The location of the property. Historically, the best performing apartments in terms of capital growth have always been within 10km of Melbourne.
- If the apartment is bought off the plan and there is a long settlement period, there may also be potential for capital growth when the property is finally completed.
- Over supply of apartments in popular areas and lack of affordability may affect potential capital growth.
- Whether there are any major developments or infrastructure planned for your Melbourne location such as a shopping complex or a new highway.
- Demographic changes to the region increasing a demand for certain types of property.
Tax advantages
One of the major incentives for buying a new apartment off the plan in Melbourne is that there are considerable tax benefits and savings such as no stamp duty. Any legitimate expense incurred in running your investment property should also be tax deductible against your overall income. These can include:
- depreciation – the ability to claim the cost of replacing fixtures and fittings such as carpets, curtains and so forth in advance of actual replacement; new apartments usually provide a higher rate of depreciation than houses or existing buildings.
- loan interest and related bank fees;
- insurances;
- repairs and maintenance of fixture and fittings;
- property management fees;
- any legitimate expense incurred in running your investment property;
Consult your accountant before buying an investment property to find out all the possible tax deductions you may be entitled to.
Costs
Expenses, fees and ongoing costs to be aware of when buying an apartment investment property include:
- conveyancing costs
- mortgage insurance (if applicable)
- loan application and valuation fees
- contents insurance as only the building will be insured under the strata plan
- a tax depreciation report and
- owner corporation fees.
Other ongoing expenses include council and water rates, property management fees and landlord’s insurance.
While the attractive tax benefits of buying new apartments as investment properties remains a strong incentive to buy, financial independence is usually achieved through capital gains growth, that is increases in the value of the property, and not normally just through tax savings. Buying an investment property should always be a long term strategy and if you do your research and buy a property in the right location at a good price, the capital gains growth almost always follow.
Find Investment Property is the best property investment resource online and features the latest new apartments and off the plan investment properties. Whether you are looking to buy investment property or looking for the best property investment research, Find Investment Property has the real estate investment properties you need.
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