What properties make a good investment?

Australia’s strong performance in the wake of COVID-19 has led to surging property demand across the country, but what’s the best way to take advantage of this boom?

Property is currently one of the most profitable ventures to invest in, according to experts, but even then there are risks!

One of the most common mistakes new investors make is failing to consider the type of property they’re buying.

Custodian Managing Director James Fitzgerald.

Custodian’s investment expert James Fitzgerald says property investments should be made unemotionally.

No matter how beautiful a house is, building values go down over time, while the increasing scarcity of land will see a holding’s value increase.

“The single most important factor to consider when buying an investment property is what is going to give you the best capital growth and the one asset which will do that is land,” James says.

“It’s great to derive a good rental income and tax deductions along the way, but the way you will really build wealth through property is for it to grow in value, and land does that best.”

This is believed to be one of the reasons why house prices rose 2.8 per cent in March, according to CoreLogic, while the price of units has dropped to a three year low.

Low interest rates, government incentives and easier loan requirements have also been major price drivers, as first and recurring home buyers make the most of the market.

Property value increases as at March 2021, according to CoreLogic.

James says the most important thing to remember is the rule of supply and demand.

“We advocate… against buying units,” he says. “If you look at the two components –  house and land – separately over 30 to 40 years, land prices have increased in value at more than twice the rate of the house value.”

“Land is in very limited supply and the demand for it will continue to grow as the population increases, particularly in fast growing areas where we see increases in more density over time.”

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