Tips For Investing In Property On The Northern Beaches

On the Northern Beaches, approximately 30% of buyers coming through our open homes are investors. That means that around 70% of people looking for homes on the beaches are owner occupiers. So, whilst it may be very tempting for investors to choose the cheapest properties that attract the highest yields, these statistics indicate that it is not a wise choice.

If the vast majority of buyers are owner occupiers, it is best to invest in a property that people would choose to live in. It will appreciate faster than a mediocre property targeted to investor buyers. More affordable properties are generally inferior. They attract investors since they get a similar or often, a much better yield. Even if you have the ‘hold and buy’ strategy in mind, my belief is to still steer clear. Why? It is simple…capital growth should always be the first priority and highly sought after properties will always fair better.

You may intend to hold your investment forever… but trust me, plans can change. In fact you should enter most long term plans with the full expectation that unexpected things may happen. If you need to liquidate your assets, wouldn’t you rather be in a position where you are selling a home that attracts around 70% of the buyer pool? Even if you are determined your purchase is for life, remember, it is still beneficial to own a property that has solid capital growth. You will be in a much better position, with stronger equity and the ability to invest in further investments. So if you see an advertisement in the Manly Daily that is screaming out to investors and ignoring the general buyer market – beware! You are likely to be looking at a property that has no appeal to the majority of the sales market. You know the ones – the apartments that feature views of ugly neighbouring blocks which usually enjoy main road noise and a less than desirable floorplan?

Inferior properties may attract the rental market but before you invest, ask yourself these questions: Does the home have a  good layout? Does it have lots of light? Is it set in a pleasant neighbourhood? A quiet street? If the answer to most of these is no – my advice is, pass on the purchase as it won’t be a profitable investment.

property investing in northern beaches

Ok. So now that the yield question is out of the way (the most commonly asked question from investors) next in line to address is the timing. Is it the right time to purchase an investment? Well right now, we’re in a climate of falling interest rates. Today (5th December 2012) the Reserve Bank decided to lower the Cash Rate 0.25% to 3.00%. This is the fourth cut this year, assisting in keeping properties at more affordable levels from five years prior. The past year has already observed extremely low fixed rates, with October’s average three year fixed rate at 5.55 per cent, its lowest rate since pre-1990. This is pretty cheap money.

So as long as your job is relatively secure, and you can afford the mortgage repayments with a decent buffer, right now is a great time to invest in the Northern Beaches market and lock in these low rates.

As always, location is a critical ingredient for investors. Many places look good on paper so my advice for investing is to buy within easy reach of your city’s CBD, close to good retail shops and infrastructure or buy in suburbs that are within a close proximity to the coast and family friendly beaches.

The Northern Beaches ticks all of these boxes so is a great location to invest in. I would recommend looking at the Lower Northern Beaches as opposed to suburbs north of Dee Why. If you look at locations such as Palm Beach or Avalon, then consider looking at property that is good as a holiday short term rental and be sure to take into consideration the winter, less popular months of the year.

My Top 5 Hot Spots for Investors on the Northern Beaches:

  • Manly
  • Dee Why
  • Freshwater
  • Manly Vale
  • Allambie/Allambie Heights
About Tim Cullen

Since joining McGrath Estate Agents 15 years ago, Tim Cullen has defined himself as a first class industry leader with an outstanding track record and rapidly growing and loyal client base. He ranked 1st on the Northern Beaches in this year’s Real Estate Business’ Top 100 Agents List and ranked 21st nationwide.