Expert Series with Australian Property Developer – Ken Dodds about the Melbourne property market

Charles Tan of Kopi and Property speaks with Ken Dodds- Resimax Group partner and director of Resimax Malaysia. Ken Dodds is uniquely qualified to offer insights and guidance to anyone wishing to improve their ability to identify, research and negotiate solid real estate deals. Ken has earned a reputation as a respected international speaker at property investment and development seminars around Australia, New Zealand and Asia.
 
 
Why should Malaysians invest into Australia’s Melbourne property market?
KD: There is just one simple, yet all-encompassing reason why you should invest into Melbourne property, and that is to make money and safeguard your wealth. By putting your money in a safe investment that guarantees capital growth and an on-going passive income, you look at the prospect of having a worry-free retirement, protect your family’s future and live the life most ideal to you- such as travelling the world or spending quality time with family.
Resimax Group clients Jon and Celeste started investing into property to protect their children’s wealth. Here’s what they had to say:
“Having first come into contact with Resimax Group 19 months ago when we bought into Newbridge Stage 2, we are more than delighted knowing that we have currently made a $150,000 gain on our property! With the unique offering of the 5/10/20 guarantees, i.e. the 5-year price protection, 10 years of rental guarantee and 20 years of structural guarantee; as well as the newly included 1% monthly interest on deposits paid, which is on top of Resimax Group’s professional, honest and open way of doing business. We have now bought into three more properties and I am sure we have not finished yet!”
 
Why should an investor buy into Melbourne property today?
KD: While there are many reasons why Melbourne property would make for a good investment, here are the top three:
Fastest growing city in Australia
Melbourne property investors have seen housing prices more than double in value in the recent past with a surge of 65 per cent in the last five years. With Melbourne being the fastest growing city in Australia, it is predicted that the housing market will continue to boom fueled by an increase in population and the consequent housing demand.
In fact, recent analysis suggests that Melbourne will become Australia’s largest city by 2050. According to data released in April 2018, Melbourne recorded its highest-ever net annual population increase of 125,000, including 87,000 immigrants and 17,000 migrants from interstate. This accounts for the highest population growth rate than any other city in Australia.
While Melbourne and Sydney lead the way in terms of job and business opportunities in the country, Sydney has become the most expensive city in Australia to buy a home and raise a family.
Nevertheless, for now, Melbourne in comparison is still relatively affordable. The median house price in Sydney is over $1 million, whilst in Melbourne it is approximately $670,000.
It is this rapid population growth that is creating massive demand for new housing that makes Melbourne residential property a solid investment.
 
High rental yields
According to Domain Group data, in the year to March 2018, rents in Melbourne suburbs have increased by up to 18 per cent, while the number of properties available have decreased- thus proving that demand is much stronger than supply. In fact, over the past decade rents have increased by 76 per cent. Demand for rental properties has substantially grown in line with Melbourne’s population increase. However, there isn’t enough property supply yet to cater to the population growth. Devon LaSalle from Tenants Victoria said, “there are more renters in Victoria than ever before – about a third of the population now rent their homes.” Domain says, more properties are needed to keep up with high demand for rentals in Melbourne”. Rents rise as stock levels dwindle. Therefore, it is fundamental that when demand is high, and supply is low that property prices and rental yields will grow.
Moreover, since salaries and wages in Australia haven’t grown in proportion to the housing market, another key factor impacting rental rates is the fact that the younger generation in Australia is not being able to afford the down payment required to secure a property. Consequently, investors in the Melbourne property market are, and will continue to reap the profits from their investment.
 
Safe Investment
A lot of potential investors ask this very valid question- ‘Will Melbourne’s growth and property prices continue to grow’?
The answer in one word is- ‘YES’. Australia currently has an aging population caused by lower fertility rates and higher life-expectancy. This is a significant challenge to economic growth as it reduces the employment rate with the older population mostly living off their savings. To ensure economic development, Australia must continue to encourage immigration.
However, despite its obvious attractions, Sydney is now saturated and witnessing a population decline. Other cities such as Brisbane, Adelaide or Perth simply don’t offer the same job and business opportunities as Melbourne. While these cities are now on the verge of growth, Melbourne is still leading the way by leaps and bounds. The biggest driving force for Melbourne is its current housing affordability with property values consistently growing, especially as new developments keep coming up to house the continuing influx of population. With all predictions leaning towards Melbourne becoming Australia’s largest city in the future, it is safe to say that property prices won’t crash any time soon.
 
Should we focus on buying smaller but nearer or buying further but bigger? (Many agents are selling small units inside the CBD…)
KD: Here’s the brutal truth- agents are selling small units overseas because they aren’t being able to sell them to locals.
The one rule that holds true to successful property investment in Melbourne is, ‘buy where the locals buy’. In Melbourne, there are still many suburbs where you can afford a house and land package in an up-coming development that is in close proximity to the city. This is where the locals want to establish their roots and live with their families. In Australian culture, people want to raise their families the way they grew up- in spacious houses with a backyard, within a community, next to a play-ground. Apartment buildings simply don’t offer that. Moreover, smaller high-rise units don’t appreciate in value because there is a problem of over-supply and too much competition. Melbourne CBD is over-saturated with apartments with not enough people wanting to live in them.
On the other hand, Melbourne still has an enormous portion of land available in the north and west for further development. These areas are now being developed to accommodate the growing population.
 
What price-range should we look at as a foreigner buying into Australia, considering that when we sell it has to be sold to an Australian resident?
KD: The median house price in Australia is $670,000 AUD. However, at Resimax Group we have access to house and land packages in northern and western suburbs starting at $500,000 AUD. Regarding the future resale of the property, as an investor, you need to think in terms of yielding profits, so I’ll repeat what I’ve said above: “BUY WHERE THE LOCALS WANT TO LIVE”. As a foreign investor, you can only sell your property to a local Australian. Therefore, it is important for you to understand the lifestyle and choices of the locals, as it will assist you in making wise business decisions.
 
Please share with us three important things to note before we decide on the property to buy?   E.g.:   reputation of the developer, population growth in the city, potential returns/guarantees etc.  
KD:

• Only do business with property developers that keep client satisfaction at the top of their mind: Starting off as a family business, Resimax Group has grown into one of Australia’s largest private real-estate development companies and an Australian success story. We have been able to do so because serving our clients is priority for us. In the past two years alone, our team has helped investors secure more than 550 residential properties. Many of those investors have already seen growth of 20 to 30% on their properties and a significantly greater return on their money.
• Make sure you receive rental guarantees: A great way to gauge your developer’s commitment is through the guarantees they offer you. For example, at Resimax Group we offer a 5/10/20 guarantee. This means: 5-year price protection, 10 years of rental guarantee and 20 years of structural guarantee. Plus, we also include a 1% monthly interest on deposits paid.
• Work with established and efficient property managers: After you have purchased and settled your property, the next step is to efficiently manage that property. As an overseas investor, you must work with a team you trust. The right property managers will ensure that your property is well-maintained, tenants are happy and that your on-going expenses are minimal.

Next suggested article: Melbourne: Most attractive and liveable city for investment?