A real estate mogul with a $4.2million property portfolio says buying an apartment near a major city centre or a university is a bad investment strategy.
In less than a decade, former apprentice electrician Daniel Walsh has bought eight houses and a block of land in four states.
While COVID-19 is expected to spark a property market crash, the 29-year-old investor was confident houses in outer suburban areas would continue delivering strong rental yields.
‘When it comes to investing I always want to buy in fundamentally strong jobs growth corridor within a commutable distance to a large CBD where blue collar families are living,’ he told Daily Mail Australia.
‘I believe now more then ever property investors need to be buying in the right areas where essential jobs are.’
A real estate mogul with a $4.2million property portfolio says buying an apartment near a major city centre or a university is a bad investment strategy. In less than a decade, former apprentice electrician Daniel Walsh (pictured with wife Sophie) has bought eight houses and a block of land in four states, with homes in outer Brisbane, Adelaide and Melbourne
Since buying his first house at Thirlmere, in the south-west of Sydney, in 2011, Mr Walsh has bought other homes in outer Brisbane, Adelaide and Melbourne, still owing $2million to the bank.
The founder of the Your Property Your Wealth buyers’ agent has, however, avoided buying apartments, especially ones near the city centre in Sydney and Melbourne.
Cafe workers in these areas have been stood down as border closures kept out international tourists.
COVID-19 lockdowns also saw white collar professionals work from home as non-essential businesses were closed down on March 23.
‘The unit market closer into the CBD’s will suffer the most as during this time, as well as tourism-dominated areas,’ Mr Walsh said.
Long before Australia’s borders were closed on March 20, he also avoided buying property dependent on rent from university student tenants.
‘I believe it will affect the rental market that has been relying on short-term stays like uni student accommodation,’ he said.
National Australia Bank is also more worried about apartments, fearing a 12.8 per cent plunge in Sydney’s median unit price by 2021 as equivalent house prices fell 6.5 per cent.
The Commonwealth Bank, Australia’s biggest home lender, fears house prices in Australia’s biggest cities could crash by 32 per cent by 2023.
Since buying his first house at Thirlmere, south-west of Sydney, in 2011, Mr Walsh has bought homes in outer Brisbane, Adelaide and Melbourne. Pictured is a four-bedroom home he bought at age 19 for $342,000 as he continued to live at home with his parents
In a worst-case scenario, this would see Sydney’s median house prices plummet by $328,454 to $697,964 going by CoreLogic data for April.
How more sellers are reducing their prices
Sydney: 13.1 per cent from 6.7 per cent
Melbourne: 10.7 per cent from 3.7 per cent
Brisbane: 7.3 per cent from 4.7 per cent
Adelaide: 8.3 per cent from 3.5 per cent
Perth: 6.8 per cent from 5.7 per cent
Hobart: 2.2 per cent from 2.3 per cent
Canberra: 8.1 per cent from 5.9 per cent
Darwin: 3.5 per cent from 4.2 per cent
Source: Domain data for April 2020 comparing the proportion of discounted property listings with a year earlier
Digital Finance Analytics principal Martin North is even more downbeat, forecasting a 40 per cent plunge in Sydney’s median apartment prices, which would see values fall by $311,176 to $466,764.
He predicted a similar drop in Melbourne, which would see mid-point unit prices fall by $235,282 to $352,922.
Unlike Mr Walsh, he feared bigger drops in the outer suburbs than the inner-city.
‘Homes in the inner rim suburbs less so and in the outer edges by 40 per cent,’ Mr North said.
Interest rates also at a record low of 0.25 per cent during a time when Australians have a record-high debt-to-income ratio of 186.5 per cent that is second only to Switzerland.
‘The Reserve Bank doesn’t care about how much debt we’re in,’ Mr North said.
‘They don’t have a plan. We have no migration.
‘No new buyers coming into the country, mortgage stress has gone from 32 per cent to 38 per cent since COVID-19 and will be 47 per cent by August.’
The founder of the Your Property Your Wealth buyers’ agent has, however, avoided buying apartments, especially ones near the city centre in Sydney (Circular Quay pictured) and Melbourne
While tenants have been given a six-month holiday from paying rent, Mr Walsh said he hadn’t faced any problems on this front.
‘I haven’t had an issue with any of my tenants in my personal portfolio,’ he said.
As part of the government’s $130billion JobKeeper package, six million workers are being paid $1,500 fortnightly wage subsidies through their employer.
How COVID-19 has affected house prices
Melbourne: DOWN 0.4 per cent to $818,806
Sydney: UP 0.3 per cent to $1,026,418
Brisbane: UP 0.3 per cent to $558,372
Adelaide: UP 0.4 per cent to $476,249
Perth: UP 0.3 per cent to $465,521
Hobart: DOWN 0.2 per cent to $512,688
Darwin: UP 1.1 per cent to $473,984
Canberra: UP 0.1 per cent to $702,861
Source: CoreLogic Home Value Index for April based on median house price changes
‘Even if they’re on JobKeeper they still have the ability to pay $300 to $400 per week rent,’ Mr Walsh said.
‘We recently purchased a property for a client in Brisbane for $379,000 that rented for $375 per week before the property was even settled.
‘That property had 42 enquiries for rent on it within just three days of listing it.’
Nonetheless, Mr Walsh didn’t recommend renting properties out to cafe workers.
‘Due to the six-month moratorium, it’s important to screen potential tenants to make sure they have stable jobs that aren’t affected by COVID-19,’ he said.
Mr Walsh was confident demand would hold up for houses in the outer suburbs of Australia’s big cities as more people worked from home.
‘I believe that many more Australians will look to lifestyle over close proximity to the CBD,’ he said.
‘Instead of living in a one or two-bedroom unit, they may now trade that for a family home a bit further out but have a better quality of life for their family.
‘I also believe there will be an increased trend of more people working from home as big businesses cut costs and COVID-19 may of taught some businesses that there might not be a need for so many employees to be working from the office.’
Long before Australia’s borders were closed in March, he also avoided buying property dependent on university student tenants. Pictured is the University of New South Wales’s Kensington campus in Sydney’s south-east
National Australia Bank is also more worried about apartments, fearing a 12.8 per cent plunge in Sydney’s median unit price by 2021 as equivalent house prices fell 6.5 per cent