Now might be the time to invest in property in Australia

Now might be the time to invest in property in Australia

  • House prices are rising impressively in parts of Australia
  • The rental market is growing, as wages fail to keep pace with property prices
  • High yields can be obtained in various cities

For many of us, Australia is about as far away from home as we can get. Yet, the strong British influence on this part of Oceania means that it has a lot of familiar sights and sounds for Brits.

In terms of the property market, there are some restrictions for non-residents. The Foreign Investment Review Board need to assess these cases before they can proceed. Non-residents buying investment properties are generally restricted to new-build homes.

The Australian economy and property market

This giant island is the planet’s sixth-biggest country. Yet, it has one of the lowest population densities, at around 2.8 people per square km.

Each city is unique here. 2017 figures from Australian Bureau of Statistics showed that Sydney had the highest earners. The top 10% here earned $2,600 (£1,294) each week. Next came the Australian Capital Territory (including the capital city of Canberra). The top 10% in Canberra earned $2566 (£1,278) a week.

Looking at specific neighbourhoods, a slightly older survey from the Australian Taxation Office showed that Sydney’s 2027 postcode and Melbourne’s 3142 postcode were where the highest taxable incomes were noted, with $192,500 (£95,859) and $190,777 (£95.056), respectively.

House prices here ended 2019 strongly. The year overall showed a 2.3% increase across the country. The good end to the year included a 1.1% prince increase in December and 4% in the last quarter. This made it the best period of Australian house prices since the end of 2009.

An interesting exception is in Darwin, in the Northern Territory. Previously known for its expensive houses, this is the smallest of the country’s capitals and it has suffered a 6-year slide on housing prices. This is largely linked to the fortunes of the Inpex gas project.

Darwin has the cheapest homes in any Australian capital, having fallen by over 30% since 2014 and by 8% in the last year. 2020 started with some signs that it may be recovering, though, making it a tempting choice for buying homes that may be under-valued right now.

The buy to let market

One of the effects of rising house prices across most of the country is that it has become more difficult for people to afford to buy a home. Wages in Australia have been rising more slowly than the property market. This has led to an expansion in the rental market.

Buy to let mortgages are known as investment home loans in Australia, with lenders usually asking for a 20% deposit. The application process shouldn’t be too difficult for anyone who has taken out a UK mortgage.

Rental prices in Sydney, the biggest rental market in Australia, have fallen to their lowest level since 2016, due to a saturated market. Darwin also saw rental prices fall in 2019. In terms of cities with rising rental costs, Perth and Hobart were the leaders, with the capital of Tasmania rising by 9.5% during 2019.

Many of the best rental yields in Australia are around 10% of so. These include Blackwater in Central Queensland at 11.7% and Broken Hill in New South Wales at the same figure.

A look ahead

2020 so far has seen the property market in Australia start to heat up. There are reports of expats in Asia boosting the market. A strong economy and a variety of attractive cities with high standards of living mean that this is likely to remain a great place to buy an investment property.

By Robert Bell
Having worked for years in the UK banking industry, I began writing and reporting financial markets after migrating abroad to Bolivia. My interests include learning new ways to make money and learning to speak Spanish.

Investing is speculative. When investing your capital is at risk. This site is not intended for use in jurisdictions in which the trading or investments described are prohibited and should only be used by such persons and in such ways as are legally permitted. Your investment may not qualify for investor protection in your country or state of residence, so please conduct your own due diligence. This website is free for you to use but we may receive commission from the companies we feature on this site. Click here for more information.