Australia’s property market has faced rapid changes and continuous pressure during the pandemic. As inner-city markets deal with renters’ exodus and mortgage prices drop across-the-board, investors face uncertainties likened to the 2008 financial crisis.
Experts are yet to get a clear picture of the true impact of the coronavirus crisis on Australia’s property market. During the latter part of 2020 up to the first month of the new year, signs of recovery are taking shape in some markets.
However, a savvy investor would find opportunities in crisis and have the foresight and flexibility to find gems in the rubble. It takes skill and strategic thinking to pivot one’s strategy to respond to change.
If you’re looking to adopt a more resilient strategy, here are some opportunities innovative investors are setting their sights on nowadays:
Adaptive Reuse of Unwanted Property
In the wake of the pandemic, many hotels and restaurants have shut their doors permanently. And many of these commercial spaces have remained vacated due to fears that starting a business during these times is unwise. However, investors with deep pockets are scouring unwanted property to convert and redevelop them into more productive spaces. For instance, hotels are being converted into rental properties offering affordable rates. Big entertainment venues and retail spaces are being resued as warehouses or distribution centers to meet the increasing demand.
Office spaces are also a prime candidate for adaptive reuse. An office building, for example, can be reused as an affordable housing project, as well as a warehouse. It wouldn’t take a lot to convert these buildings into liveable spaces as they are already equipped with essential facilities. However, if you’re looking to invest in these spaces, you might encounter challenges in zoning and city regulations. But once you overcome these, it can be a profitable long-term investment.
Affordable Housing in Outer Suburbs
In the pre-COVID era, investors saw inner-city markets as “prime” investors, especially in CBD’s where the rental demand and rates are consistently high. But the restrictions on immigration and domestic travel and the exodus of students as schools shift to online teaching have resulted in massive vacancy rates. Because the rental rates have also decreased, many property investors shy away from the inner cities and shift their focus away to more affordable housing marketings.
House and land packages in outer suburb developments are popular options. These developments are the “hot spots” nowadays because people are taking advantage of their affordable rates. Plus, most workers have shifted to telecommuting, so there’s an increasing demand in family homes with multiple bedrooms, wide-open spaces, and peaceful neighborhoods.
Industrial Real Estate
In the consumer markets, e-commerce has positioned itself to be the most resilient and sustainable business model. To avoid closures and bankruptcy, businesses have expedited their digital transformation and moved their operations online. There has been a growing need for distribution centers, cold storage units, and warehouses. In the commercial real estate market, industrial properties are seeing an uptick, and risk-embracing investors are hard at work to find the best properties that fit the bill. This top-performing sector appears to be a long-term solution as e-commerce will soon become the norm over traditional retail.
Running an industrial property complex, however, is a lot different than a rental or retail space. Renters will expect your property to suit their business and logistic needs, so make sure to study the market carefully and have a specific target market in mind.
Rental Property in Depressed Markets
As mentioned above, many investors have been moving away from rental real estate, especially in depressed markets. But if you don’t mind taking some risk, there are some opportunities yet to be discovered. For instance, many tight-strapped landlords have difficulty managing their property and finances these days. This is especially true in high-density urban areas where landlords have been forced to lower rent and deal with delinquent payments to keep the business running.
As such, many landlords have been forced or will soon be forced to sell. If you have the patience and capital to ride out the impending financial crisis, you can pick up one of these properties at discounted prices and keep it running at a minimal cost. In the future, when cities fully recover (which is inevitable), you’ll see great returns and a long-term, high-value asset in your portfolio.
It may seem futile to do any form of investing these days, but many prolific investors have actually started during crises. Many take advantage of the drop in mortgage rates and interests and low property prices and end up with a greater bottom line in the long run.