Sydney and Melbourne are no longer the leading cities for property investors. But Victoria may still present opportunities. Here are four factors that suggest investing in Victoria is a good idea in 2019.
2018 hasn’t been the kindest year for investors in Sydney and Melbourne.
These were previously Australia’s fastest-growing cities. At one point in time, Sydney had a median property price of around $1 million.
But both have seen pretty steep declines in 2018. Sydney’s prices have fallen at their fastest rate for about 30 years.
Melbourne’s been a little more stable. But it’s also seen marked declines.
These issues have affected the entire Australian property market.
But there’s good news for investors.
These declines don’t mean that there are no opportunities available for you. Amidst all of the turmoil and uncertainty, one state looks set to provide huge opportunities.
Victoria is that state. And there’s plenty of evidence to suggest that it will be a great choice for investors in 2019, despite what happened in Melbourne in 2018.
In this article, we examine the reasons why Victoria may prove to be an investor’s best option for 2019. From infrastructural improvements to tight rental markets, the state has a lot going for it.
Reason #1 – $8 Billion of Infrastructural Improvements
It’s no secret that Victoria has had a congestion problem for several years.
The influx of people in Melbourne has led to traffic jams and travel problems all over the state.
Worse yet, nobody’s done anything about it for years. The state’s infrastructure hasn’t changed in any noticeable way in a long time.
But that’s set to change.
In the 2018 budget, the government announced more investment into Victoria’s infrastructure.
Over the next few years, the government will invest $8 billion into making improvements to the state’s road and rail systems.
The idea is to ease the congestion problem and make it easier for people to get around.
And this is great news for property investors.
Premier of Victoria Daniel Andrews outlines some of the reasons why.
“We’ve never seen so much work going on,” he says.
“Which is great for jobs, it is really important in terms of managing growth and setting us up for the future. If you have the federal government as a partner … well, you can get more done.”
That means the infrastructural improvements offer two great things for investors.
Firstly, they’ll make it easier for people to move around the state. That’s always positive news as better infrastructure means greater access to work opportunities.
And that usually results in an influx of people into a state.
Secondly, Andrews highlights the economic improvements that will come from the investment. It’ll result in job creation and further growth.
Again, more jobs means more people arriving in the state. This will increase demand for property, which means that investors may be able to command higher rents.
Furthermore, this economic stability improves buyer and tenant confidence in their finances. It also means that investors have fewer concerns when it comes to tenants losing their jobs and not paying rent.
Reason #2 – Melbourne Looks Set to Recover
The Domain Group is one of the leading sources of property market information in the country.
And we can look to their Property Price Forecast for some good news about Melbourne.
According to the forecast, prices in the city look set to stabilise and eventually start rising again over the next two years.
Domain economist Trent Wilshire says that Melbourne’s house prices will likely decline by 1% in 2019.
He says: “That’s probably driven by things like the royal commission, and tighter bank lending standards playing out into 2019.”
However, this sets up a predicted 4% increase during 2020.
Wilshire also says that units in the city represent a safer investment. They’re likely to increase in value by 1% during the next two years.
The good news here is that the 8% decline we saw in 2018 isn’t likely to continue. And savvy investors can take advantage of this fact.
Waiting for the final remnants of the decline to hit in 2019 should allow investors to purchase property at low prices. From there, the 4% increase that’s predicted for 2020 would mean almost immediate capital growth.
If this all happens, Melbourne will enjoy a faster recovery than anticipated. Plus, this may have knock-on effects for the rest of the state of Victoria.
Combine a recovering Melbourne with improved infrastructure and you create new opportunities.
Suburbs outside the city may become more attractive to buyers and tenants.
These predictions also suggest that those who have current investment properties in Melbourne should hold on to them.
Reason #3 – More Start-Ups Arriving in Melbourne
The infrastructural improvements mentioned above aren’t the only good signals for Victoria’s economy.
The state also hopes to become a hub for start-up businesses.
2018 saw the launch of the Victorian Innovation Hub. Located in the Docklands in Melbourne, the hub provides office space for start-ups.
Perhaps more importantly, it connects budding entrepreneurs with experienced business leaders.
As a co-working facility, it’s drawing start-ups to Victoria.
And of course, more new companies means more new jobs. That’s great news for investors, especially if some of these start-ups grow. They’ll create jobs, which will attract people.
And that means more demand for your property.
Philip Dalidakis, who is Victoria’s Minister for Trade and Investment, says: “This hub is the next step towards giving Victorian start-ups and entrepreneurs the help they need to expand, network and be in a supportive environment that will help them turn their dreams into reality.”
All of the evidence points toward a bright economic future for Victoria.
And that can only benefit you as an investor.
Reason #4 – The State has a Tightening Rental Market
We can look to Melbourne again to provide proof of this.
For several years, the city’s rental growth has been on the moderate side. Continued price increases likely had a part to play here.
However, this looks likely to change in the near future.
Property investment expert Michael Yardney says that there’s a shortage of rental properties in the city right now.
And that comes at a time of heightened demand that looks likely to continue. After all, the city’s economy looks set to grow over the next few years.
The lack of supply to meet this new demand presents opportunities to investors.
Yardney says that vacancy rates in the city are already on the decline. And with that will come opportunities to raise rents.
It’s possible that this effect will extend beyond Melbourne too.
As renters look beyond the city, they’ll start occupying housing stock in Victorian suburbs. Again, this may cause supply issues that benefit investors in the long run.
Victoria had a tumultuous time in 2018. The large drops in Melbourne’s house prices left a lot of people feeling uncertain about the state.
And that’s natural.
Fear is always an issue when it comes to property investment.
However, the factors mentioned in this article suggest that Victoria holds a lot of potential. New infrastructure and a strengthening economy are both great signs. They may lead to an influx of people into the state, which creates more demand.
Now, couple that with the supply issues that the state already has.
It’s a recipe for increased capital gains and rental yields in the coming years.
You just need to create a strategy that will help you take advantage of the evolving Victoria market.
Wealth for Life can help. We know what you need because we’re investors ourselves. The advice we give to you is the advice we use every day to grow our portfolios.
And we’re here to help.
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