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If you’re wondering what will happen to property investment in Melbourne for the year ahead, you are not alone.
While demand from investors had been low in 2020 due to the high levels of uncertainty and the understandable logistical challenges of buying in Melbourne during a mandated lockdown, a spate of recent property deals shows developers are spearheading a return to normality.
Chamath Senanayake looks at recent trends providing confidence to property investors moving forward.
Regional Market Growth
The new-found flexibility in workplaces have given rise to demand for properties further from the city, creating more opportunities for investors to enter the property market at an affordable entry point.
From a commercial point of view, warehousing demand is mirroring this trend, with a movement of businesses leaving the city, exploring new options and opportunities for land subdivision in regional areas.
As things stand, Australia’s current cash rate is at a historic low, but banks are being much more stringent in their lending conditions due to the current economic climate and the lasting effects of the Royal Commission.
The Treasurer has recently announced the temporary relaxation of the responsible lending guidelines and with interest-only loans more readily available and the lowering of mortgage rates, investors are finding encouraging signs to return to the market.
The property market is suffering from less foreign investment with the global pandemic travel restrictions meaning less current demand for newly developed properties – specifically apartments. But the prognosis is positive as Australia climbs up the list of desirable places to live in the world and is likely to experience positive economic growth as migration figures will rise again. Good news for the surplus of new housing, especially inner-city apartments that will appeal to buyers.
Dual Development – Build to Sell and Rent
Apartment complex investment structures have evolved from build-to-sell to build-to-rent or a combination of apartments for rent and sale. Where traditionally developers would build, sell, and walk away, developers now need to be carefully structured behind the scenes to achieve the best tax (CGT, GST and stamp duty) outcomes.
Considering the higher proportion of equity required, this includes consideration of (the complex!) Division 7A impacts for long term investment by private company owners.
2021 and Beyond
Although it is tough and the effects of COVID-19 seem to have changed the face of real estate, investors should take advantage of opportunities that will arise, whether in metro city areas or regional markets. Aside from economic change, business, retailers, and people in general, have all changed their approach and need for space.
In our practice we are seeing high net worth families actively preserving inter-generational family wealth with long term property investment in new and exciting directions. Lean into the new directions and we will all move out of this together.
If you’re considering your next investment property and need strategic advice for business structuring or tax advice, tap into over $500 million worth of transaction experience and perspective at Slomoi Immerman Partners.
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