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Should I buy an investment property in 2023?

15 February, 2023 / Category: Blog

Should I buy an investment property in 2023? banner image

What makes a successful property investment?

Successful property investment relies on four key factors:

  1. Strong rental demand
  2. Increasing rental rates
  3. Long-term capital growth 
  4. Good property management

The Melbourne market ticks all these boxes right now.

Why are rents growing so quickly in Melbourne?

When interest rates were at all-time lows, many people were better off buying than renting. However, as interest rates increase, pressure is put on many buyers to hold off on buying and turn to rent. In addition, Melbourne is also seeing significant growth in migration, particularly from overseas, which is adding further pressure to rental demand. Investors who currently own properties are reaping the rewards of this with strong demand for their properties and increasing rental rates.

A Chinese government ban on online studying which may lead to more than 40,000 Chinese university students arriving in Australia in the next few weeks, is likely to put further heat on the already stretched unit and CBD markets.

Since the start of the upswing in September 2020, Australian rent values have lifted 22.2%, marking the largest rental upswing on record, and we believe there is scope for more in Melbourne. Melbourne’s median unit rental yield is now 4.51 per cent, up 18.4 per cent over a year. 

At Infolio, our portfolio of more than 700 properties has a vacancy rate below 1% ensuring our rental providers minimise downtime between tenants while also realising market-appropriate rental increases. The average rental rate across our portfolio has increased by 28% in 2022, making it by far the best year for rental growth we have ever witnessed.

Should I be investing now in the Melbourne property market?

Property investment is a great space to be in for an investor to be in right now and with good management, most of our rental providers have been able to achieve their desired rental increases without having to change tenants. Most renters are accepting that they have to pay more rent as they are aware of how tight the market is. Nicole Hiddlestone, head of Property Management at Infolio said “in some  cases, we have been able to increase rents by more than 50% without changing the renter, and in the case that we do have to put a property back on the market, we have a long list of great renters to fill the space at the asking rent.”

How long will the growth last?

With strong employment and growth, as well as a rising population and a shortage of homes, Melbourne is ideally placed to see good opportunities for investors in 2023. Hiddlestone doesn’t think the lull in investment will last long, “I think the strategic investor who isn’t fearful of purchasing in a downturn and has an eye on the fundamentals of the housing market and an understanding of the dynamics will be back in droves.”

To find out more about our Property Management team, or to discuss investing in property, contact us or book a discovery call.

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