Mum-and-dad investors are lured into disability housing with the promise of high government-backed returns and the chance to contribute to society.
5 things to be careful of NDIS
- Overestimation of Rental Yields: One drawback of National Disability Insurance Scheme (NDIS) property investments is the potential overestimation of rental yields. Property promoters may market these investments with enticing high returns, often ranging from 10 to 20 percent or more. However, these projected yields may not materialize due to factors such as vacancy rates, property location, and the actual demand for specific types of disability housing.
- Misleading Marketing and Unrealistic Claims: The NDIS property market has witnessed aggressive marketing strategies that some argue are misleading. Investors may be enticed by promises of “government-backed”
investments and guaranteed returns, creating an unrealistic perception of the safety and reliability of these investments. The Australian Securities and Investments Commission (ASIC) has expressed concerns about such claims, emphasizing the need for investors to approach them with skepticism. - Mismatch Between Supply and Demand: There is a risk of an oversupply of certain types of Specialist Disability Accommodation (SDA) properties, particularly those designed for High Physical Support (HPS) participants.
The rush to market the highest possible returns might lead to the construction of properties where land is cheapest, rather than where there is a genuine demand for disability housing. This mismatch could result in vacant homes and potentially poor investment outcomes. - Complexities in SDA Configuration: SDA properties require specific configurations to cater to the needs of individuals with disabilities. High Physical Support (HPS) properties, for example, demand additional design features, and payments under the SDA pricing matrix vary based on the level of care required by tenants. Investors may underestimate the complexities involved in ensuring that properties are well-located, purpose-built, and of high quality to attract participants.
- Potential Impact on Investor Confidence: If the aggressive marketing and overinflated claims lead to disappointing investment outcomes, there is a risk that investor confidence in the NDIS property market could be undermined. This could deter future investments and impact the overall growth and sustainability of the disability housing sector, potentially affecting the lives of disabled Australians who rely on suitable
accommodation provided through the NDIS.
When I should buy NDIS
- Demand and Supply Dynamics:
- Evaluate the demand and supply dynamics in the specific areas where you are considering NDIS property investments.
- Assess whether there is a genuine need for disability housing in those locations.
- Networking and Consultation:
- Establish connections with NDIS service providers, industry experts, and professionals in the disability housing sector.
- Seek advice from financial advisors who have expertise in this niche market.
- Investment
Goals and Risk Tolerance: - Clearly define your investment goals, whether they are focused on rental income, capital appreciation, or a combination of both.
- Assess
your risk tolerance and align your NDIS property investment with your overall financial strategy.
Current Situation around the market
There are a lot of untruths around SDA Property and how ‘property mavens’ on social media are espousing that everyone should avoid them by misquoting fact.
Right now, there is very little market information around the preferred type of dwellings the NDIS are requesting to be built, meaning very little reliable information off which you the investor can make an informed decision as to which disability category you should build for and in what locations to build.
Yes there are apartments and houses being purposefully built, yet to be completed or tenanted, so no data here. Of the new property supply, they are pretty much evenly spread nationwide, based on recent feedback by the NDIS.
As early adopters into any new market, the early adopters mitigate their risk, get in early and more often than not come out the other end ahead of the next wave of investors who then follow the early adopters.
Undertake your own due diligence, speak to industry professionals for the purpose of arriving at an informed investment decision and then decide to avoid or decide to Invest.
Acquiring Tenants (Participants)
t is a risky investment when you do not have an end to end solution on hand.
What we mean by this is that, sure anyone can go and buy a SDA property or build one on their existing block of land, but without a licensed SDA Rental Manager, your asset is dead in the water and becomes a rather expensive purchase. Without one, you are unable to access NDIS payments, even if you have participants occupying the dwelling. I hope you understand the importance of this statement. No SDA licensed SDA Rental Manager = no NDIS payments to you, even if you have participants in the dwelling!
What this should mean to you is that “as important as the SDA property is to you, having a licensed SDA Rental Manager (and one who charges reasonable management fees) is just as important.
You would want to work with a professional firm, who on getting an understanding of all of your requirements and purpose for the investment, match the NDIS property to your goals and outcomes you are wanting, who also provide an end-to-end solution for you and your investment.
Right dwelling, in right location, who have sound relationships with Care Givers in that location, who are open to providing you with tenants (participants), managed by an approved SDA Rental Manager.
Conclusion
If you cannot find Provider or tenant yourself then this is
not investment for you rental income of 150-175K a year is a lie and you should
not buy on that promise until builder is ready to sign 2-3 year leasing
contract for that price.
You one bad investment can put you back many years if not for life so think
twice or contact us before making any such investment.
What role does the Reserve Bank of Australia (RBA) play?
The RBA is Australia’s independent central bank and responsible for overall financial system stability.
Part of its role is determining the official cash rate, which represents the interest banks and lenders have to pay on the money they borrow. This influences economic activity and inflation.
Banks and lenders don’t have to follow suit and change interest rates when the RBA changes the cash rate, but they tend to do so, with increases and decreases generally flowing through to borrowers.
How do rate rises impact you?
If you’ve got a variable-rate home loan, you’re more than likely aware higher interest rates mean higher repayments, and that’ll also apply to numerous fixed-rate home loans that rollover to higher variable rate loans this year. But what do rising interest rates mean for your super and investments?
Super savers and retirement pension holders
If your super is invested across several investment types, such as shares, property, fixed interest and cash, an interest rate rise could make your super balance go up or down, depending on how it’s invested.
For retirees, higher interest rates could be a good thing. This is because as people approach retirement they may move to lower-risk investments (such as fixed interest and cash) and have less exposure to higher-risk assets like shares and property.
Other investors
Share markets react to interest rate movements, but instability tends to be short lived. If the economy remains strong and company earnings can grow, shares historically perform fairly well.
Direct property and property securities are generally impacted as higher rates reduce borrowing capacity. Higher interest rates may also slow down the property market by reducing demand.
Meanwhile, returns are generally favorable for those invested in more conservative assets like fixed interest and term deposits.
Things to keep in mind
While a number of industry experts have signaled further rate rises are likely, some have indicated the number of rate rises may stabilize.
The pace and extent of interest rate rises will come down to economic conditions, which are still fairly unpredictable at this point in time.
While you may want to review your investments and ensure your portfolio is well-diversified and age appropriate, it’s important not to be reactive and do your research before making any decisions.
History shows those who stick with their strategy are generally rewarded.
If you’re after some advice, speak to your adviser or feel free to contact us any time