Where can I buy real estate in 2022 Australia?

Of course, there are a number of issues worth weighing up before you decide whether to invest in property. Some of these are positive factors for investors, such as:

Low Barrier to Entry

Property is often seen as less of a risk compared to other investments, often because it doesn’t require any particular specialised knowledge, such as what is required in a niche market–such as NFT trading or buying and selling cryptocurrencies. It also comes with ample benefits such as capital gains, rental yield, and tax deductions, which we’ll explore below.

Capital growth on property

Capital growth refers to the increase in value of your property over time, which is calculated by comparing the current market value with your initial purchase price. For example, if you purchased a property for $500,000 ten years ago and it is now worth $900,000, you’ve made $400,000 in capital.

Australian property investors have traditionally enjoyed high capital gains returns. According to the latest CoreLogic Pain & Gain report, which consolidates data from approximately 102,000 resales in the quarter, 93.8% of those sales made a profit.

“This was steady in the March quarter, but has moved lower from a recent high of 94.1% in the three months to April 2022,” the report reads.

Overall, the median gain for sellers during the quarter was $270,000, while the median loss was $33,500.

Rental yield

While capital growth will take years and even decades to hit your bank account, rental yield offers more immediate rewards.

Ultimately, rental yield is the difference between the income you receive from tenants minus the overall costs of your investment.

If your intentions are to rent out your property to tenants, then it is paramount that you consider the investment property’s potential rental yield.

As Lilly Schneider, an investment property advisor with Abercromby’s explains, a rental yield between 6-11% would be considered a good return for an investment.

However, rental yield will differ from state to state.

“Generally rental yields are higher in capital cities than in regional or metropolitan areas, although a significant shift in lifestyle as a result of the pandemic has resulted in a notable change in the past 24 months for certain areas of the country,” Schnieder says.

Additionally, investors may find that properties with good rental yield tend to be less expensive to purchase than those in areas promising good long-term capital gains. This means that the costs associated with a purchase, such as tax and mortgage repayments, will also be less overall.

Investment in a physical asset

For some, a major driving factor for investing in property is that it is a tangible, physical asset. Unlike shares, individuals can see their investment in its physicality. They can drive past the property whenever they like; they can fix whatever is broken.

This tangibility “provides the confidence and total control for investors, something which isn’t guaranteed when investing in the stock market”, Schnieder explains.

Tax deductions

If you rent out your property, you can claim deductions for most of the expenses you incur in these periods.

Enter the negative gearing tax break. As the ATO explains, your rental property is ‘positively geared’ if your deductible expenses are less than the income you earn from the property. If your deductible expenses are more–and therefore you do not make a profit from renting out your property–then it is said to be ‘negatively geared’.

Speaking with Forbes Advisor, Pina Brandi, director of PB Property, explains that the tax break for negative gearing was made available in the ’80s to boost construction and help the government accommodate Australia’s growing population.

“Australians benefit from negative gearing because the government doesn’t have resources to provide adequate volume of accommodation to the burgeoning population, let alone affordability schemes and incentives,” Brandi explains.

“By adding tax incentives for investors, [the government has created] a stimulus to investors to buy and support the construction of more dwellings. This translates into more jobs, more service providers, more opportunities and keeps the country developing.”

The capital gains tax discount is another tax incentive investors enjoy. The CGT discount was introduced by the Howard Government in 1999, and allows individual taxpayers to reduce their CGT by 50% if the asset–including property–has been owned for at least 12 months.

However, it is important to note that if the asset is your home and you first started using it for rental or business purposes less than 12 months before disposing of it, you are unable to claim the CGT discount.

With many areas already hitting record highs, investors need to conduct thorough research to avoid paying above market value.

Nila SweeneyReporter

Dec 16, 2021 – 5.00am

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The housing market is predicted to slow significantly in the year ahead and even contract once interest rates start rising later in 2022, but there are plenty of opportunities for investors looking to cash in on the next wave of growth, experts say.

Home buyer demand has fallen sharply since the peak earlier in the year, as affordability worsened, making the market less competitive for investors. At the same time, listings have surged across the country’s biggest housing markets, offering more options for buyers and scope to negotiate a good deal.

The rapid rise in home prices also forced many aspiring homebuyers back into renting, fuelling a surge in demand for rental accommodation.

Houses in more affordable suburbs such as Campbelltown in Sydney are tipped to do well in the year ahead. Peter Rae

During October, the vacancy rate fell to a decade low of 1.6 per cent nationwide, SQM Research data shows.

“I think it’s a good time to invest because money is still cheap and people have a lot of disposable income,” says Victor Kumar, a buyer’s agent specialising in investment property at Right Property Group.

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“The greatest catalyst for growth is yet to come – the reopening of the border and restarting immigration. So if you’ve bought the right property in the right area, you’d do well. You just need to be careful as to what and where you’re buying.”

Where can I buy real estate in 2022 Australia?

Where will prices be in 10 years?

With many areas already hitting record highs, investors need to conduct thorough research to avoid paying above market value, says Peter Koulizos, program director at the University of Adelaide’s School of Architecture and Built Environment.

“The main risk is paying too much for a property, with so many people paying ridiculously high prices for property at the moment,” he says. “Once this boom is over, property prices will flatten, and in some locations may dip slightly. You don’t want to be in negative territory when the market slows down.”

It is also important to focus on the long term, not on small price movements as they tend to be immaterial over a decade, says Doron Peleg, co-founder of buyer’s agency BuyersBuyers.

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“Try instead to think about where prices will be 10 years from now,” he adds.

So which areas offer potential for strong capital growth and rental returns? Here are the experts’ top picks.

Wynnum, Brisbane

Pete Wargent, co-founder of BuyersBuyers, picks Wynnum for its good transport links and city access, proximity to water and desirability for buyers and renters alike.

“Rental vacancy rates are very tight in Wynnum, at just 0.5 per cent, and we expect rents to rise strongly in 2022 and beyond,” he says.

Carrara, Gold Coast

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“The rental market on the Gold Coast is very tight due to strong internal migration. With rents rising quickly, the market is attractive for landlords,” says Wargent.

“Rental vacancy rates are extremely tight in Carrara, at just 0.3 per cent – as close to zero as you’ll likely ever see – and we expect rents to rise strongly in 2022 and beyond.”

Buderim, Sunshine Coast

“Buderim has a fine, elevated position yet is still relatively close to the beaches,” says Wargent. “The centre of Buderim has a strong community vibe and attractive small-town feel.”

Rental vacancy rates are tight, at just 0.6 per cent, and rents are set to rise strongly in the near to medium term.

Croydon, Melbourne

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“The suburb has strong connectivity and transport for the city with its bus and rail links, and has homes on attractively spacious blocks of land, which will appeal to families,” says Wargent.

Rental vacancy rates are tight, at just 0.5 per cent, pushing rents up in the years ahead.

Campbelltown, Sydney, NSW

Affordability will begin to bite for houses in Sydney’s top-performing suburbs next year, but there are still suburbs and pockets where prices have not yet soared out of reach, says Wargent.

“Campbelltown to the south-west of Sydney covers a large area, and buyers need to choose their asset carefully, but there are still potentially attractive entry points for buyers looking for detached-house investments,” he adds.

“Rental vacancy rates are relatively tight in Campbelltown as compared to the inner-city, at just 0.7 per cent, and rents for houses are set to rise in the years ahead.”

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Burleigh Waters, Gold Coast

Units are not cheap, with the median at the end of November touching $650,000. But demand is high relative to supply, says Jeremy Sheppard, research director at Select Residential Property.

“Units spend about a month listed for sale before being snapped up. That’s about three times faster than the long-term, national average advertising period,” he says.

There are roughly 1800 searches conducted online for each property available for sale, which is more than the available homes for sale.

“Median rents have climbed an impressive 25 per cent in the last 12 months taking the typical yield up over 5 per cent. A tight vacancy rate of 0.2 per cent should lead to even further rent rises,” he says.

Fairy Meadow, Wollongong

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More than 40 per cent of units listed for sale are to be sold by auction, indicating strong demand from buyers.

“There is a strong probability this suburb is about to enter its next growth phase,” says Sheppard.

“Searches made online for property in Fairy Meadow are around 1300 per property listed for sale. This is a reflection of strong demand relative to supply.”

Tweed Heads, Gold Coast

The vacancy rate for units in Tweed Heads at the end of November was 0.3 per cent. Rents have increased by 12 per cent over the last 12 months, leading to a healthy yield of 4.6 per cent.

Growth in neighbouring suburbs over the last year has been a lot higher than Tweed Heads. That growth should flow over into Tweed Heads, says Sheppard.

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Online search interest is high too, with over a 1000 searches per property for sale.

Runaway Bay, Gold Coast

The median unit price at the end of November was $636,000. And while selling times are a bit sluggish, a 100 per cent auction clearance rate suggests there’s heat in this market from buyers, says Sheppard.

“The vacancy rate is just 0.4 per cent leading to some good growth in rents and a yield of 4.5 per cent,” he adds.

Maroochydore, Sunshine Coast

Units are going for $670,000 and achieving a 4.4 per cent yield, says Sheppard. “Yields had climbed with rents rising 19 per cent in the last 12 months, but they could go even higher in the coming year with a vacancy rate of only 0.2 per cent,” he says.

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“Demand is ahead of supply, indicated by one in two properties listed for sale being sold via auction.”

Lake Macquarie East, NSW

The three suburbs of interest are Tingira Heights, Cardiff Heights and Macquarie Hills, says Kent Lardner, research director at Suburb Trends.

“There’s a lake on one side and beaches on the other, with plenty of national parks and hills to capture views,” he says.

“It’s an easy commute to Sydney once or twice a week and buyers are flowing up from the Central Coast and down from Newcastle.

“The area is also transforming. Many houses are ripe for renovation or knock-down and rebuild, with larger blocks available and many suited to duplex development, subject to council approvals.”

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Weekly rents for houses have increased by $50 in the last 12 months with vacancy rates for the area currently 0.66 per cent.

Top tips from experts

Look for scarcity value: If the budget allows, look for family-appropriate housing as families are still the largest buying demographic in landlocked suburbs, says Peleg.

Look for a high land component: ”It is the land price that does the heavy lifting for investors over the long term, so look for properties where the land price accounts for 60 per cent or more of the asset value,” says Peleg.

Look for amenities: Sought-after school zones are a strong driver of demographic and real estate trends and these areas could do well as an investment, Peleg says. “Also look for transport connections, shopping and entertainment facilities, a diversity of local employment opportunities and a good walk score.”

Choose large units in small complex: The gap in house and unit prices has blown out to 61 per cent or $523,375 in Sydney, CoreLogic data shows. As houses become unaffordable, large units become attractive to buyers, says Kumar. “Well-located units in small complexes will give you a decent rental yield of around 4 per cent, and once immigration restarts, we could see a spike in unit prices,” he adds.

Pick high liquidity assets: Kumar says sticking with properties that are easy to dispose of if you run into trouble is also important. “Ensure that the property you invest in can be quickly and painlessly offloaded, which means avoiding properties that are too specialised such as a dual key or serviced apartments because they tend to be riskier,” he said. A dual key apartment has two dwellings sharing a front door. Much of this is common sense: look for strong and increasing demand, and a limited supply of the available product.

Will 2022 be a good year to buy a house Australia?

The pent-up demand is waning: While many buyers delayed their home-buying plans over the last few years because of Covid, a significant volume already made their move. There are only so many buyers and sellers out there, so we can expect there will be fewer looking to buy in 2022.

Where will Australian house prices go in 2022?

Prices in Sydney and Melbourne are likely to fall by 1.5 per cent a month through the rest of 2022.

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