As humans we have a tendency to favour the familiar. When it comes to property investment we look to opportunities in our own city. In this article DPN explains the many reasons investors should consider their property options interstate.
The benefits of compounding annual growth and multiple sources of income are well recognised. DPN advises that investing in interstate property could be an overlooked opportunity.
A means for diversification
As with other asset classes, concentrating all your capital in one position is a risky approach. While it may help in maximising gains when everything is working in your favour, your exposure is heightened when there is a downturn. Interstate properties help you diversify your portfolio and mitigate risk.
Smooth out market variances
Location is everything in property investment and each capital city is at a different cyclical position. For example, research from the Residential Property Price Index shows that while the main markets of Sydney and Melbourne surged before recently cooling, Brisbane has remained largely steady and Adelaide has continued growing.
Each market has the capacity to strengthen and temper at different times and by different rates. Factors including state economies, housing supply, infrastructure and population growth will shape variances in rental yields and property price growth. Therefore, an interstate investment strategy provides your portfolio with exposure that can smooth out market variances.
What to consider when investing interstate
Investing in an interstate property requires extensive local market research, as you would with a property in your own city. The differences between markets should not be overlooked and there are variations in legislation. Buying an established property sight unseen can be a major risk, so be prepared to budget for flights or entrust an advocate on your behalf.
For more comprehensive information, see DPN’s article: Investing interstate can help you leverage the property cycle.
Disclaimer: Chan & Naylor takes no responsibility for the accuracy of any research material of contributors to our newsletter. Contributions to our newsletter such as this article, “How Property Investment Can Help You Retire in Comfort,” are meant to be educational only and Chan & Naylor does not endorse any promotional material promoted in their articles. Readers should do their own research to determine the accuracy of their material.
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