Eight property pointers for buying or selling in 2013

1. Melbourne may be problematic, but regional Victoria has good prospects: Terry Ryder

Hotspotting.com.au director Terry Ryder says that while the Melbourne market is imploding, there are “good prospects for investors beyond the capital city”. Ryder picks Bendigo and Ballarat as locations that more investors should consider, describing them as strong and dependable. His other picks are in the west of the state, Warrnambool and Mildura, which offer similar qualities to the two former gold-rush towns and have “diverse economies, plenty of infrastructure spending and affordable real estate”.

2. Continue to be cautious about investing in prestige property: Louis Christopher

In SQM Research’s 2012-13 Boom and Bust report, managing director Louis Christopher urged caution about investing at the prestige end of the market, “where rental vacancy rates are higher, and transaction and holding costs are far higher”. Christopher says that from a purely investment perspective, it makes far more sense to acquire and hold three properties at $500,000 each, instead of one property at $1.5 million.

3. Modest growth in all capital city markets, with Perth and Sydney to outperform: Richard Wakelin

Richard Wakelin, director of Wakelin Property Advisory, anticipates price growth across all the major mainland capital city markets in 2013, with Sydney and Perth the best placed. He expects Sydney property prices to rise by between 4% and 5% in 2013, with its low vacancy rate and high rental costs “a signal for renters and investors to buy property”. Wakelin says Perth prices could rise 5% to 6% in 2013 despite much of WA’s booming resource-driven economy bypassing Perth.  “Nevertheless, extreme tightness in the rental market appears to be overflowing into greater demand from first-home buyers. If this continues, Perth may see reasonably strong growth in 2013,” he says.

4. Expect more competition for properties at the lower end of rental market: Margaret Lomas

Margaret Lomas expects there to be increasing competition among investors for properties at the lower end of the market that are popular with renters. “You are going to have more competition for those types of properties … in the early and mid-part of 2013,” she tells Realestatetalk.com.au.

5. Melbourne, Adelaide, Darwin and Canberra to consolidate in 2013: Aaron Maskrey

Aaron Maskrey, research director at PRDnationwide, says Melbourne should continue its period of consolidation after recently experiencing a peak in its market cycle. “Like all large markets, there will always be pockets of areas that will still hold value, and this should be the case with most inner-Melbourne suburbs. Due to a somewhat balance between demand and supply with Adelaide, expect its market to remain fairly consistent, with only marginal increases in value during 2013. Canberra’s market remains fairly tight and values are expected to hold firm over the next 12 months.  Darwin has experienced a sustained period of high growth in 2012, pushing the market to unaffordable levels. The coming year should see growth in prices reach a plateau, as its market consolidates,” he says.

6. Consider the outer ring of most capital cities: Louis Christopher

SQM Research’s Louis Christopher favours Sydney’s west and Sydney’s south-west to continue to perform strongly in 2013. “Indeed, we favour the outer rings of most capital cities. In its simplest terms, the reason is that these areas have been underbuilt for some time now, yet demand for affordable accommodation is growing rapidly,” says Christopher in SQM Research's latest Boom and Bust report.

7. Remain risk-averse in 2013 and reduce your debt: Pete Wargent

Property investment writer Pete Wargent says he will use debt moderately in 2013 to add to his property portfolio. Wargent writes that the loan-to-value ratio (LVR) on his UK property portfolio is under 50%, but a little higher on his Australian property portfolio, but he is steadily reducing it. “Yes, a higher debt-to-equity ratio magnifies returns, but at what cost? The cost is risk. It was common for promoters of UK 'property clubs' to talk of 'being worth £2 million' in property up until around 2007. But where they were investing in far-flung and remote properties using 100% mortgages, the only thing they are likely to be worth today is being lynched by angry investors who were duped into doing the same,” says Wargent. He will look to add two properties to his portfolio over the next few months, but “will look to use cash rather than drawing equity and will use 25-35% deposits (one in south-east England as a long-term currency play and one in Australia)”.  “Of course I could be more aggressive in order to leverage up and chase greater returns … but don’t forget that I am, after all, an accountant. After years of boring-but-safe and risk-averse investment I will remain disinclined to take on greater risk,” he says.

8. Look to the “battlefield suburbs for price growth: Angus Raine

Raine and Horne CEO Angus Raine expects 2013 to be a challenging one for the property market, with the possibility that a “smattering of suburbs across Australia could enjoy some capital growth of between 5.5% and 7%”. Raine says investors should be looking at the “battlefield suburbs’, where first home buyers are set to shape up to investors”. “In other words, St Marys in Sydney, Adelaide’s Semaphore, as well as North Melbourne, Ascot Vale, Brunswick and Footscray in Melbourne are set to benefit as investors compete with first timers for quality homes. Across the continent, it’s the ‘forgotten suburbs’ of inner Perth such as Embleton and Ashfield that will enjoy some growth as investors and first time buyers muscle up,” he says.