Hi everyone and Happy New Year to you all.
Amongst all those New Year’s Resolutions I’m hoping that you’ve added building wealth to the list because right now is a great time to buy the right property in the right location if you’re looking at long term investing.
Over the past 3 months the most common question I’ve been asked is “Is it a good time to invest in property?”
Let’s look at what we have to judge the answer by;
1. The Australian Economy
The economy in Australia is stable and from the information I have been receiving, that should continue unless something extraordinary pops up to change that. Compared to other countries, we seem to be traveling at a very healthy pace with Employment reasonably strong and the inflation rate in check.
2. Demographics
Our population is slowly changing with more and more people living alone which means we need more dwellings just to house the same number of people. Unfortunately rising divorce rates are not helping here, as well as the fact that we are living longer. All of this means that more people will be seeking more accommodation both as tenants and owner occupiers, pushing up property values and rentals.
3. Rent BOOM to continue in 2011
In Australia we currently need around 160,000 additional houses, units and apartments to support our growth and add that to the fact that affordability of housing is decreasing it means more people will become tenants. As an investor this is a great problem as demand for rental properties is outstripping supply. The other issues which are of interest to an investor is that we are in a time of record low vacancy rates, plus fewer investors bringing new properties onto the market and low housing starts which all mean residential rents will rise even further over the next few years. All this is setting the market up for a rental boom.
4. Steady Interest Rates
Last year we saw 5 interest rate rises and even though it is likely that there will be further interest rate rises this year, I feel that due to the stability we are now entering, the RBA is likely to be more cautious with interest rate increases this year ensuring we don’t stall the steady momentum they have been working so hard to achieve.
All this makes 2011 a great time to buy properties because we are now in the buyers’ market stage of the property cycle. The funny thing about buyers’ markets is that this is the time when buyers aren’t buying because they are worried about so many issues that seem to be slowing the property market. One of these issues is that there are more properties on the market than we have seen for a while and for the uneducated investor this will seem like a problem. Contrary to this belief it is the time when sophisticated investors buy good properties and set themselves up for the next stage of the property cycle.
But as you’ve heard me say before… you have to be careful because not all properties will perform well. Care needs to be taken as our property markets will be patchy and unstable in some areas which may even show negative growth. As interest rates increase, affordability will be one of the key issues that limit property price growth in some suburbs in 2011. A traditional first home buyer’s area will be capped at a certain limit as the target purchasers merely can’t afford the price anymore.
These are outer suburbs, which are usually where home owners are more interest rate sensitive and where many are currently struggling to meet their mortgage payments, these are areas where prices are likely to stall with no movement at all. We are also going to see a glut of ‘off the plan’ properties coming on stream in the CBD’s which will mean potential problems there.
So while the news is not the best for first home owners and renters, the current property markets offer good opportunities for investors who buy selectively.
We’re moving into the next phase of the property cycle , one of increased risk for many investors who are not aware of the market movements in specific areas, yet one of great opportunity for those who know their stuff.
If you want to grow your own property portfolio, you need to own properties that provide wealth producing rates of returns. This means buying a property below its intrinsic value, in an area that outperforms the average over the long term and one to which you can add value so you can create some capital growth. This could be through renovations, refurbishment or redevelopment. This is not hard to do, you just have to have up to date information on values and do your research.
Buying an established property is mainly about knowing the market as well as knowing where to look and that’s were Total Investment Property Solutions comes in. We’ll take care of all the research and take the stress out of buying your first or next investment property.
Until next time, Fred.
