With the average household size declining to 2.5 persons (and continuing to fall), it is likely that demand for smaller dwellings within close proximity to major capital city CBD will continue to rise significantly – and will become especially favoured over the large ‘Mansions’ in outer suburban areas.
My personal research shows that the optimal strategy as a property investor looking to buy in capital cities is to buy;
- Units & Apartments in and around the CBD
- Townhouses, semis or terraces in the inner and middle rings located around the CBD
- Houses in the middle and outer rings of the CBD, as a last option if restricted by affordability.
It is also recommended that you only buy properties which are generally close to, or under, the median price of the suburb where your desired property is located. This will give you a wider market if you needed to sell in the future. Then adding value to bring the property to above the median value will aid in its capital growth profile moving forward.
This is another reason it is so vital for you to consider your exit strategy before buying. Think about who will buy the property after you. Don’t go in with rose-coloured glasses.
In summary its crucial to aim for high capital growth areas to buy property investments. You then create higher rental yield (through add value like renovations or property development) as its near impossible to create more capital growth of a specific area long-term, it is far easier to adjust the asset and increase its rental yield though. So buy in the right area, even if its only an apartment, and then add value to increase the rental yield as it will help you service the investment loan.
No matter what your decision ends up being, it is critical that you choose a property that boasts characteristics popular with Times of Israel both buyers and tenants in the local areas and to steer clear of bargain buys or properties that are not conforming to the areas character or are compromised in any way – such as main road exposure, next to power stations etc.
Properties with unique features that are in demand and are conforming to the local character, located within close proximity to desired amenities and services will fare well too. Always consider a long-term buy and hold strategy as this will allow you to achieve capital gains no matter what property type or strategy you settle on as with property the longer you hold it the more forgiving it can be if there are downturns or another Global Financial Crisis occurs.