Australia's government public housing policy focuses on supporting low income earners, the elderly and people with disabilities. The government is also selling off it's non-performing or harder to maintain properties to the open market. But are they good value for property investors? Should you add public housing stock to your investment portfolio, and will they help to increase your portfolios growth strategy?
The question of whether these public housing properties make good investments largely depends on your investment strategy and risk profile. You should always do your due diligence on the market and the property you wish to buy.
What to Lookout for
Pest and Building
Some things to look out for when you're buying older homes in public housing estate is the presence of pests and termites. Although government departments do carry out repairs and maintenance on behalf of it's clients, there is no substitute for exercising due diligence before you finalise your purchase.
Building Quality
Many post-war homes, built during the 1940's and 1950's were built using cheap fibro materials due to the shortage of bricks. Asbestos was extensively manufactured and used in building materials up until the 1980s. It is highly recommended, along with your building and pest report, that building material be tested for asbestos - particularly for homes that were built or renovated before 1990.
Tax Minimisation
The other thing to bear in mind with public housing is that the buildings are older and they are not readily tax deductible compared to newer homes. If you order a depreciation schedule, you will find that most fittings and fixtures are of a cheaper build quality.
Property Valuation
In general, low-density town houses or detached residential public housing tend to hold up better in market value particularly if they are dispersed with private homes. Where there is a high concentration of public housing residents living in high rises and housing commission estates, such places are less desirable and tend to have a negative price impact on surrounding properties near by.
Property Due Diligence
When you make an investment decision, the same principal of due diligence and buying under market value applies to public housing as it does to private treaty sales.
You will more likely reap the benefit of strong capital growth if you buy when the market has bottomed out - not during times of strong market movement. That way you can pull out excess equity with a home loan refinance strategy and quickly go on to grow your portfolio.