Vacancy rates not the key indicator for a strong investment

April 22, 2015 | Media Statement

While vacancy rates can be a useful indicator of a suburb’s performance, they should be taken with a grain of salt, according to Perth buyer’s agency, Property Wizards.

Buyer’s agent Liz Sterzel said that areas with low vacancy rates can indicate high demand from tenants, but that should not be the only criterion an aspiring investor uses when selecting an area.

“Four of the top criteria property investors need to consider when purchasing a property in Perth include the suburb’s proximity to the CBD, the ocean or Swan River, public transport and amenities that attract tenants, such as shops and schools.

“If you can find a property that ticks all four of these top criteria and is not in oversupply,, vacancy rates become a secondary consideration.”

LOW VACANCY AREAS TO CONSIDER

Ms. Sterzel said that of the 10 suburbs in Perth with the lowest vacancy rates, with the best opportunities tick extra investment boxes over and above the low vacancy rates.

“Duncraig, for example, is especially promising, being only one suburb from the beach and Hillarys Marina as well as being on the train line and freeway to the CBD, with portions of the suburb included in City of Joondalup’s proposed rezoning area.

“Adding value through subdivision or renovation is a popular strategy in Perth, and can really accelerate an investor’s portfolio growth if done carefully.

She said that Maddington, Ballajura and Beechboro have also been singled out by their councils for future development, with Maddington already zoned accordingly.

LOW VACANCY AREAS TO AVOID

Not all areas with a low vacancy rate are necessarily a solid investment, Ms. Sterzel said.

“Kelmscott and Reservoir both have very low vacancy rates at the moment, however their long-term potential is hampered by their locations, more than 30km from Perth CBD.

“While it may be possible to find a Kelmscott property in good proximity to the train station, the commute to both the city and key business districts is off-putting to many potential tenants.

“Meanwhile, Reservoir’s draw cards lie in its rural aspect, and with few amenities and no train line nearby, it appeals to a very narrow group of potential tenants,” she said.

She said that it is also important to consider the price you are paying for a property and the yield you can achieve before settling on a suburb in a superior location.

“Trigg’s vacancy rate of 0.8% is very appealing, but with a median price of $1,100,000 and gross yield of only 3.2%, the properties are out of reach of most investors.

“For those investors with a million dollar budget, there are superior opportunities available elsewhere and they may consider reducing their risk by buying two properties, each at half the price, at the same time increasing their yield.”

OPPORTUNITIES EXIST FOR THE RIGHT STRATEGY

Ms. Sterzel said there are still good opportunities to purchase a successful investment property in Perth’s current market for investors who have carefully planned their strategy, done their research and enlisted professional help.

“Perth’s market has been in a bit of a lull lately, largely due to the downturn in the mining industry, but it is not all doom and gloom.

“People continue to see Perth as an attractive city to live in, and while the population isn’t booming ahead as it was, the rate of growth is still strong.

“Those areas within easy reach of the CBD, close to the ocean or rivers and with easily accessible amenities will continue to display great opportunities.

“There is good demand for the right properties whilst properties in oversupply are lingering on the market.”

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