With the Sydney market currently in the downward stage of the cycle, many experts are tipping for the market to reach bottom by around mid 2019. With a good proportion of investors and owner occupiers alike scheduled to move from their interest only to principle and interest periods, many owners might be put under financial strain if they haven’t prepared their cashflow accordingly and subsequently be forced to sell earlier than they had originally planned.
There has been a long wait from some investors that have entered the Brisbane market 3-4 years ago in the hope that the next boom after Sydney and Melbourne to deliver solid capital growth would be the Queensland state capital. Much has been talked about on when the time will actually arrive that Brisbane will finally deliver some consistent capital growth. Obviously since then we have had Hobart step up to the plate, and deliver investors in the Tassie capital city the sorts of returns many investors in Brisbane had been hoping for.
If 2018 was the year of finance, then 2019 will surely be the year of cashflow, as serviceability and an investor’s personal financial circumstances play an even more important factor in the ability to grow and even hold onto their property portfolio.So why commercial property? Well yield of course, and more specifically, NET yield. A cashflow focused strategy through residential property might deliver gross yields of around 6-7% in regional areas, or through dual occupancy properties. However when all outgoings are taken into consideration, the resulting net yield is a far lower, 1-2% if your lucky!
Commercial property on the other hand through the tenant paying outgoings such as insurances, strata, water, and even possibly rental management fees and land tax, make a passive income from property actually possible. Now more than ever this will play in an investor’s favour as they navigate potentially moving from IO to P&I on some of their properties, be the recipient of increased scrutiny on their personal living costs by banks, and try to meet their subsequent serviceability challenges.
Yes you read this correctly, mining towns. Often seen as one of the riskiest plays in property investing, mining towns have been quietly making a resurgence in the second half of 2018, with lowering vacancy rates, and increased rents and yields as a result. After multiple years of consecutive declines in medium values, locations such as Port Hedland, Karratha and Moranbah look to have reached their bottom, and even started to rise again in some instances. Many an experienced investor would advise to invest at your peril, with timing and understanding the commodities markets being key performance indicators rather than only your traditional property fundamentals such as employment rates, population increase, new infrastructure etc.