Of late, we have been getting some letters from our readers asking for our modest opinions on the issue of property buying in Australia. Today, we want to specifically talk about the student accommodation near university campuses.
One of the USPs (unique selling propositions) that the advertisers and developers are highlighting is of course the fact that these properties are very near universities and colleges. The logic is that there will be no difficulties renting out these units. So, the parents who buy these properties for the sake of their children can then rent out these properties upon their children’s graduation and return from Australia.
In the eyes of Malaysians or any foreign investors for that matter, Australia is one of safest places on earth to invest their money. Its property market has been growing steadily over the last two decades. They consider the system transparent and, on the whole, the country stable on all fronts – politically, economically and socially.
It has a sound banking system, industries that the booming ASEAN region needs for the decades to come and its middle class strong and well-educated. And I say they are right. But because of this view, many investors have sort of become slack in verifying the true intrinsic value of these student- apartment type properties that are mainly targeted at Asian parents and not the locals.
They have failed to ask the critical question – are these properties (near university campuses) reflecting the local typical prices that locals would readily pay for? If money is the least of your concerns, you can skip this article right now. For those who do not mind paying more than the locals, they need not read further as well. But for those buyers whose purchase amount still constitute a significant portion of their total wealth and are still hoping to buy something really worthwhile for both rental returns and long term capital growth, I think they had better consider an alternative strategy.
Here is how it works.
For example, you want to buy a property near Swinburne University of Technology at the Hawthorn Campus because your kid is going to attend that university next year. So, you look around for an apartment block near the campus. There are quite a few on Burwood Road. Very convenient location – near university campus and the Glenferrie train station. The shops and restaurants are near too. There are Woolworth and Coles supermarkets there as well.
If you do not have a PR resident visa, you must only buy new developments. The idea is to create employments for the local economy. But we have parents who have PR visa but because they have not lived here yet, they come in to buy this kind of property for their kids who are attending university soon.
They should not do that. Since they have PR visa, they should buy something slightly further away from the campuses. In short, they should be buying those types of properties where locals are just as likely to buy and not those only new PR Visa holders (and Asian parents) will buy, The only problem is that it is not near the campus. And if you kids do not drive, and your kids still prefer to live in those apartments where mostly students will live in, what is your solution?
I think you can do this.
Buy that property which is further away from the university campuses (where the locals are just as likely to buy them) and rent it out. You will have a good capital gain over the long term and also a relatively good rental returns. You kids can still rent a unit nearest to their uni. They will still live in one of those ‘student apartments’ on Burwood Road, enjoying its proximity to everywhere. The ‘student apartment’ rent they pay will come from the ‘local apartment’ rent you collect.
When your kids graduate they will just leave that student apartment and return to Asia. And if they want to apply for PR visa to settle in Australia, they can then move in to the ‘local apartment’ – now that they do not need to live near university campuses. I think that works better in the long term. Once you bought these student apartments, it is very hard to exit. The capital gain is not going to be too attractive and the rental will not be high enough as a viable return on investment.
This article was written by Ken Soong (co-author of Migrating to Australia Good meh???).