08 Sep The low interest rate opportunities – Shannon Davis
This low interest rate environment is opening up a number of opportunities for astute investors and Shannon Davis clues us up on what is happening.
Kevin: Certainly, everyone’s rejoicing about the low interest rates. I think they’re the lowest we’ve seen on record, certainly since I can remember, anyway. I know this is creating a lot of talk amongst property investors. Let’s get some word on what they are actually saying. Shannon Davis from Metropole Property Strategists in Brisbane joins me.
Shannon, thanks for your time.
Shannon: Good day, Kevin.
Kevin: You’d be hearing a lot – I guess – of people talking about the opportunities with low interest rate, but are you seeing more property investors into the market?
Shannon: In the Brisbane marketplace, we’ve seen post the federal election that there’s been an upswing in auction clearance rates and a little bit more sentiment, I think. The money rate, you’re not getting much money in the bank, so I think there is probably going to be a further move out of cash. It will either be to properties or shares, and I think the Brisbane market is well placed to attract some more investment.
Kevin: Is that because of affordability?
Shannon: Yes, affordability, a reasonably high yield, and a low cost of money. I read somewhere it’s just about $1.2 million needed in savings to get the same as the pension, so the big losers here are savers at the moment.
Kevin: That’s obviously going to change – interest rates will move up at some stage – but it’s a good opportunity to get in and maybe even lock in a rate. Do you think it’s good to lock your rate in at this time?
Shannon: I would always be loathed to lock 100% in. There was talk from NAB through the week that they expect a 1% cash rate earlier next year. With their predictions of further cuts to the variable, I think you’d lock yourself out of that. Then there’s the break cost fees, as well. You can never say never, truly. You don’t know how your life will happen to you, so I think if you were to lock in, just maybe lock in a portion.
Kevin: Let’s talk about oversupply because there’s been a lot of talk about that, particularly in the unit market. Inner city Brisbane, driving around, you see a lot of cranes. Is that a concern?
Shannon: Yes, it is to some areas. The really oversupplied markets at the moment for investors include the CBD, Kelvin Grove, Chermside, West End, and Mount Gravatt. They’re some of the areas that you probably want to be out of at the moment because where you see lots of supply and physical growth, you don’t see much capital growth. Rents will be soft, and your chances of capital growth also.
But it’s not as simple to say that all apartments are bad investments. There are areas that are very tightly held, that have had no real development, and are attractive to that demographic, i.e. walkability, café precincts, transport, and shops.
Kevin: Are we seeing many buyers come to the Brisbane market because it’s much more affordable than Sydney?
Shannon: Yes, and there’s a sentiment that Sydney and Melbourne may have moved, and it could be Brisbane’s turn next. What’s held us back in the past is job creation, but the Brisbane market has taken a lot of its medicine in that rate. The actual apartment boom is taking a lot of the jobs from the mining redundancies, and those people are getting jobs back in construction, so it’s not all bad news.
Kevin: Just before I left you go, if you’re looking for good investment in South East Queensland, where would you be looking right now?
Shannon: We have a particular focus in New Farm. It’s still doing well capital-growth-wise. There’s some vacancy around Morningside, as well. It’s well located and the first train station on those eastern suburbs. Coorparoo has had great upside with the eastern busway and the old Myer Centre development, and also Taringa and Wooloowin, which are both well located for transport, shops, universities, and CBD. They’ve done well consistently for our clients, and we’ll be sticking to those existing properties and adding value where we can.
Kevin: There you go. If you’re looking to invest in the Brisbane market, they’re the places to go and have a look.
Shannon Davis from Metropole Properties. Shannon, thanks for your time.
Shannon: No worries, Kevin. Any time.