Investing in property is often seen as a positive move, which can yield good returns.
Generally, these returns are achieved over the mid-to-long term, with a range of factors causing property to vary in value. And while the local economy or changes in employment levels can cause prices to increase or moderate, over time these changes are smoothed by longer-term trends.
This has been shown in new REIV data which has found that, across regional Victoria, both homes and units have shown solid capital growth over the past five years.
The data showed that, as at December 2013, the median price of a one-bedroom unit in regional Victoria – a property type favoured by many investors for buying to let – showed an average annual capital growth of 4.1 per cent over this period. For two-bedroom units the figure was 3 per cent and 2.1 per cent for a three-bedroom unit.
The average annual capital growth since 2008 for a two-bedroom house was 3.7 per cent. For a three-bedroom house it was 3.5 per cent and for a four-bedroom house it was 3.6 per cent.
Our latest rental data was also good news for investors with t he vacancy rate in regional Victoria tightening slightly – to 2.6 per cent in February, down from 2.7 per cent in January. This reflected vacancy falls in most regions, except for the Shepparton and Goulburn region which rose 0.8 per cent, and the Ballarat region. The vacancy rate across the Ballarat area rose to 2.2 per cent in February, after being the tightest major rental market in regional Victoria over the previous two months.
Median house rents across regional Victoria rose remained stable in February at $300 a week, while the median rent for units fell by 4.0 per cent over the month to $240 a week.
While this data shows that house rents did not rise in comparison to the previous month, and unit rentals fell, a short term dip in rental medians also needs to be considered over a longer period. For instance, house rentals rose two per cent (or $6 a week) in the previous month alone. What matters most is a property's long-term performance, both as an income stream and a source of capital gain.