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What not to do in property investment

People always ask me, what is the secret to property investment success, John?

Today I’ll start with telling you what it’s not . . .

For nearly all individuals, it’s not investing in commercial or special use property.

It’s not investing in residential property within such categories as resort, rural, regional or capital cities that we would not consider ‘major metropolises’.

It’s not investing in property markets that are reliant upon one or two particular industries or one or two particular sectors of the economy.

Therefore, it’s not investing blindly in Perth.

To explain, Perth is one such city we would generally not recommend. The reason has always been the impact of the resources sector.

That lovely residential home in Subiaco or a nice apartment in West Perth over the long term past would have shown all of their owners appropriately high returns. However, they would not have had the same levels of security as medium to high density residential properties in Kirribilli or Albert Park.

And that, to state again, is because of the impact on the Perth economy of the resources sector.

For that individual that might like to speculate over a 10 year period, to choose a quality medium to high density residential property in the best inner urban areas of Perth when that property market is at its lowest ebb (the trick is to know when) could show high return. But remember that’s a speculation, not an investment.

According to recent Core Logic data, Perth house prices have only increased by 2.3 per cent in the past 10 years. This of course reflects the low growth that has occurred since the dramatic slowdown in the resources economy in recent years. You can’t have the value of iron ore drop from about $150 down to $60 and not impact the balance sheet of the Western Australian economy, Perth economy and then the Perth property market.

Over on the east coast, Sydney and Melbourne continued the strongest growth in house prices, with capital gains in Sydney hitting 16 per cent for the year and Melbourne jumping 15.3 per cent.

Click here to read more about Perth’s property market demise

Lantern Property Partners has stood by its property investment philosophies for 37 years; our Recommended Property Selection Criteria has not changed and our due diligence processes have been finely honed to enact these strategies.

By following our clear selection criteria, we’ve been able to recommend property to our clients that helps them build wealth through a sound property investment strategy.

We’ve always said that clients should choose the best inner urban areas of a major metropolis from a demand, popularity and opportunity point of view – which is why Melbourne, Sydney and Brisbane continue to prosper.

It’s not fair to pick on Perth, but it does help us prove a point – while there are key investment philosophies that can help you succeed, there are also key investment mistakes you can make without the right, considered advice.

Speak to a Lantern Property Investment Adviser on 1300 132 435 or email us to find out more about Lantern’s key investment philosophies.

 

John Hopkins
Executive Chairman

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