At the Resimax’s Property Power workshop recently, main speaker, Ken Dodds shared some pertinent points that Malaysian buyers must consider before buying any overseas property, in this case property in Melbourne.
Here are four important points to take note of.
Property investment is about people. Demand will have to come from population growth. The state of Victoria attracts the highest number of new people.
In terms of actual numbers, Victoria had over 137,000 people in 2017 alone. If we look at a ratio of 3 to 1, that means up to 46,000 new homes had to be built to cater to this growing population.
As a young city, Melbourne is home to over 4.9 million people. According to 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. Dodds shared that it’s very important for foreign buyers to buy what the locals buy.
For example, foreigners are restricted to buying new properties. Many are attracted to smaller high-rise units but if we were to ask the locals about their preference, it will be landed homes.
These landed homes are usually in the suburbs but because of the expressways and rails, 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 want to sell the property many years later, it will be far easier to sell it to the locals if we bought what the locals preferred in the first place.
Buy where locals can afford it. The median home price in Melbourne is over AU$700,000. It’s not a price locals can easily afford.
The median income for full-time workers in Melbourne is AU$65,000 and if we calculate this as a household, it might be AU$130,000 per year.
At this income level, the median property price of AU$700,000 is categorised under “Severely Unaffordable” or a 5.4 ratio.
Therefore, when we buy property for long-term investment in Melbourne, it’s much better to buy at price levels that are lower.
This will make the investment much safer because we need the locals to be able to afford the property we bought when we are ready to sell it in the future.
Buy where there’s a long-term development plan. It’s easy enough to pick a popular area to buy property in, but when it comes to making investments it’s far more important to understand where we are buying and who we are buying it from.
By right, we should ask the developer a lot of tough questions about the area. Are there good connecting roads? Are there good schools? What about connectivity via rail?
In Australia, developers cannot tell you, “It depends on the government’s approval.” Everything they tell you must have already been approved and they must show you the approval plans. So, ask for it.
This article first appeared in kopiandproperty.com
Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.