Investing this season?

With the property market growing 8% nationally over the past 12 months and over 13-15% in Brisbane and the West, pandemic passes, and interest rates steady, now may be a good time to invest in residential property.

  7 minutes


The current growth of the property market is an early sign that now may be the time to consider investing in residential property. According to Colin Li, BOQ Group Head of Home Buying, inflation levels are continuing to fall, with the latest annualised rate down to 4.1%, a two-year low, which may impact interest rates. He adds that rental values continue to improve, which, when combined with possible interest rate reductions, could lead to increased investor activity in the market. “The early indications are that things have stabilised,” says Trevor Robertson, BOQ Specialist’s Head of Residential Products. “That’s why Autumn could be a good time to consider investing in the property market. However, you need to be very selective in what you look for.”

Residential property has long been an attractive investment option for medical professionals, as such investments generally generate good returns, and if not, creates a negative gearing situation which may help with tax deductions, depending on each individual’s circumstances. However, as Trevor points out, expectations of high migration levels over the coming year will continue to put pressure on stock levels and property values. “People need to be careful that they’re not paying top price,” he says. “There still appears to be a disconnect between expectations of property value and the property’s real value.”

“The sheer movement of population after the pandemic, combined with increased immigration, means that there are significantly low vacancy rates everywhere,” adds Julian Muldoon from 1Group Property Advisory. “It also means rents are up anywhere from 10 to 30% over the last 12 to 18 months. That has meant investors have been able to hold their investment properties while rates are rising.” 

Investors’ market

The market for residential property is generally made up of 30% investors and 70% owner occupiers, the latter of which can be further broken down into first home buyers and those upsizing or downsizing. First home buyers were previously disadvantaged in the market because of the difficulty in saving for a deposit, and reduced borrowing capacity due to high interest rates.

However, that could change quickly. “Fixed rates are starting to look more attractive in the market as overall 2- and 3-year fixed rates are starting to fall 20-30bps below the equivalent variable rate product,” says Colin Li. “This development could be particularly attractive for investors are looking for interest stability. For home buyers whether if you are a first home buyer or upgrader, an improved fixed rate also opens up the option to do a split loan where you have partly fixed and partly variable.”

Upsizers and downsizers are in a better position, and as Julian points out, they are frequently looking for properties with vacant possession so they can buy and sell seamlessly.

“Investors have got a bit of an edge,” he says. “If someone is selling a property with a tenant and they’ve still got six to eight months to run on their lease, it’s not attractive to an owner-occupier. So, that could be an opportunity that sells at a lower price due to less competition.”

He points out that the main reason the property market is holding up better than expected at the moment is because stock levels have gone down significantly and demand has not wavered. “The competition cooled off when stock levels were low. But stock levels have improved significantly. We expect early 2024 to be an exciting time in the property market.”

So investors need to be ready. “The best opportunity in the property market is always in retrospect,” says Julian. 

Do your homework

The fundamental truth about the property market is, despite fluctuations, it has always been very resilient. “Historically, residential property has been a very sound asset,” says Trevor. Julian adds, “The key thing is to get to the coalface and do your research. Be across the market and ready to buy so you’re not scrambling when everyone else piles back in when sentiment rises.”

Doing your research entails having a long-term goal, for which you can draw up an investment strategy. “It’s about working out where that set of numbers, growth target, borrowing capacity, cash flow capacity and objectives fits into the property market,” says Julian. “Every state has different price points, different yields, different major projects to tap into. There are definitely windows of opportunity. I would suggest this year is certainly going to be an opportunity for those that are financially viable and ready.”

Trevor adds that the general principles of picking the right locations still apply. “For example, don’t buy in an area that is flood prone,” he says. “Some councils have fantastic online tools where you can check for this – particularly if you’re looking in a regional or rural area. Make sure the property is not subject to environmentally protected areas. You need to really do your research, and find out the environmental and legal impacts the property may be subject to, so you don’t get caught short.”


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