In an environment with a low rate of interest, Australian investors are chasing better returning resources but none as hot as residential and commercial real estate.
While residential investments have boomed for the past four years, commercial ones (particularly those with long leases) are also highly sought after because they generally produce higher yields of between 5 to 7 percent in capital cities. The return is higher in regional areas (around 8-10 percent) but there are greater risks for tenants. By comparison, as it has been told, residential investments are returning an average combined capital return of 3.2 percent.
For as long as I can recall, strip retail and shopping centers are among the desired property types for investors. These are usually popular with vendors such as restaurants or boutiques and tend to get filled up fast, depending on its location and other factors. One example could be the retail center in North Hobart filled with niche market shops as well as restaurants with some of the best dinner menu in Hobart.
This has changed dramatically over the last two years since lackluster retail trade figures and the rise of the internet has cut to the outlook for rental returns. Another business property type to have had a dive in popularity has been the development areas.
While listing prices are put in many markets lately, a drop in foreign property developers and fewer investors in the market has led to a drop in demand for these sites. What, then, would be the industrial forms worth looking at today?
The Return of The Office
The ‘return of the offices’ have been trending down for a while now and while the cost for office suites and buildings have continued to grow, the decline of these tenants has been an issue.
This has turned, and the prognosis for rental growth is favorable in several markets — even the ones that have had higher vacancy rates like Perth and Brisbane.
Which property will benefit the most from technological change?
Online retailing requires it, future farming needs it and finally, driverless cars will require a lot of it. Industrial properties are the main beneficiary of technological change.
While a lot of these are long-term structural changes to industrial property demand, right now occupation growth across Australia is making this a highly desired property type.
It is not just large warehouses in outer metro areas, we are also seeing a rise in demand for smaller properties in inner suburban areas.
Resorts Are Still Going Strong Despite The Airbnb Setback
Airbnb has been a significant disruption throughout the world. It is therefore perhaps a bit surprising to see that resorts continue to be high in demand. Australia is seeing strong growth in tourism numbers, particularly from China in which 1.3 million people arrived over the previous 12 months. One of the best hotels in Hobart Tasmania is still attracting visitors due to its creative marketing efforts.
While the increase of Chinese tourists is very strong, other nationalities such as tourists from India, the US, and Canada have seen strong increases at the same time.
Look to top tourist destinations to determine where the demand is strongest — out of perennial favorites such as the Gold Coast to emerging hot spots like Hobart and Adelaide.
Should you turn your back on retail and development websites?
While the belief towards retail property has turned into, not all of retail is doing poorly and some regions are doing especially well.
Chapel Street in South Yarra may be fighting to attract tenants however up the road in Windsor, a strong restaurant precinct has developed. Similarly, purchasing centers with strong catchments continue to thrive. While more of us store online, not all shopping will be done online.
For development sites, the key now is to pick areas where demand for flats is strongest. While investors have staged a retreat, first home buyers have grown across all capital cities over the previous 12 months.
In most capital cities, first home buyers receive favorable grants if they purchase a new property — whether that’s a home or an apartment. Places such as Geelong, where apartments generally failed to see a strong need, have seen a jump in search action on realestate.com.au.
Perhaps you have missed the boat?
With monetary expansion going away in Sydney and Melbourne residential property markets, more investors are shifting its sight at commercial property, attracted by better profits and in some cases, bigger chance for growth.
At the moment, the demand for commercial real estate remains strong and we are not seeing the slowdown that is evident in residential.
It’s, however, getting expensive. As such, doing your research to comprehend the best markets to get, as well as tenant advocacy services, is more significant than ever.
Next, we have included a tiny segment for smaller shareholders. People who wish to invest in a modest capital of $100,000 may benefit from studying this.
AUSTRALIAN PROPERTIES YOU CAN INVEST FOR LESS THAN $100,000
These days, even simply to have a start on the property ladder, then you’re taking a look at signing onto a mortgage over half a million bucks.
But in the commercial real estate market, it would appear you may still get your foot in the door without hitting those astronomical price amounts.
Whether that is taking on your small company, investing in an office space for leasing or to be occupied for yourself, or perhaps living out the Aussie dream of running your own country pub; here is what you can still buy for less than $100,000 around Australia.
An Island Cafe
It may appear to be an incredibly rare find, but for $90,000 it is possible to get an established cafe on the scenic Norfolk Island of NSW.
The popular local cafe has recently been remodeled to be more open and modern and is centrally located in the island’s most important shopping precinct (if you do not mind the two-hour travel to fly there from the mainland).
The café, with up to 80 square meters, also features an ice creamery into the side which is very popular with all the after-school rush.
A Bar in Country Victoria
The iconic country bar has a special place in several Australians hearts. So it’s no surprise you may have heard a friend say “I would love to own my own pub one day”, or maybe you’ve even said so yourself.
Well here’s your chance; this circa 1914 bar on the foreshore of Little Lake Boort in Victoria, offers five cold beers on tap, a drive-thru bottle shop, restaurant, TAB, lodging and also a function room all on a 2000-square-meters — the ideal first bar really.
With a price tag of $98,000, the sale is only for the 14-year lease, not the property itself, but it still retains the dream alive.
An Inner-city Office Space
While being small, this office area is located at a prominent business precinct in South Melbourne.
At 17 square meters, you can get yourself or a small team started in your next business enterprise or start-up.
The workplace is part of the St Kilda Rd Towers complex with parking, shared boardroom, concierge, kitchen, fitness center, bar, and restaurants all located on site. It’ll set you back $80,000 excluding GST.
Your Hotel Investment
It may just be a hotel room but situated in Carrara halfway between the beaches and the hinterland of this glittering Gold Coast, this might be the ‘buy and forget’ type of investment you’re after — for $82,000 excluding GST. The hotel rivals this luxury accommodation in Tasmania, so you know that the investment will be worth the money.
Run by Accor Group and Mercure Gold Coast Resort, they’ll take care of the letting and reservations while you plan your very own discounted remain.
Investing in a hotel room might be something that you want to do if you frequent the area a lot. It would be like your own private accommodation, with added benefits such as access to the hotel facilities, especially if the hotel is known as one of the best luxury resorts in Tasmania.