Don’t be scared by property gloom headlines

Warning: Property prices set to crash; the bubble is ready to burst; the average price of homes in Australia is 40% to high.

These are the kind of headlines that are currently being sent in to local rags around the country. So what should we do? Not buy any property? Not spend any money? Or should we delay any improvements on our homes because they are all too expensive already?

There is nothing new about headlines like this and as an investor, for some time now I have seen these types of headlines on a number of occasions. The facts are that yes, the values of properties have stalled, in fact we should expect for them to go sideways for a while. And yes, in some areas prices might even fall, but that’s not new. It’s simply all part of the property cycle.

So what has really happened?

If we go to the experts that work with facts and not try to guess at what’s going to happen, we will find that according to RPData-Rismark’s Hedonic Index, the Australian median house price fell 0.9% or $4,700 in the last quarter and dropped just 2% or $10,600 over the last 12 months. So at a time where there is so much negative talk and general lack of confidence in the market, we are doing ok in my opinion.

What would it take for properties to really crash or head south in a dramatic way?

A recession – not going to happen.

Massive unemployment – this will mean people won’t be able to pay for their mortgages and there would be a huge supply of stock on the market. Again – not going to happen

High interest rates – I think with all the troubles overseas, rates are pretty well in check with some economists predicting rates to drop.

So are housing prices in South Australia to high?

Possibly, however consider this;

We live in large homes on large blocks and in most cases only 30 minutes from the CBD.

Many of the other CBD’S in the capital cities of Australia are surrounded by apartments and high rise buildings yet we can buy a reasonable size block of land within minutes of the CBD for around $300,000 – $500,000.

We have the hills and the sea within 45 minutes of each other and if you compare this to any other city around the world you would be paying a premium.

All this and we are running out of land close to the CBD so we are having to head further out to live, however due to the exceptional planning of our great state we can reach these areas in quick time.

I spend a lot of time driving all over the state visiting my clients and I often joke with my staff saying that I can get to almost any appointment within 30 minutes. Well not quiet, but not far off either. Try driving 30 minutes from the CBD of Sydney or Melbourne and see what you will pay for the equivalent housing.

Make decisions based on facts, not hype.

Investing in property, like most good investments, is not about making a quick buck. For the majority of our clients it’s all about how they will use the benefits realised by property in retirement. What we do know about property is that over the last 80 years the average property price in Adelaide has increased by 8% per year. That means that you would expect an average $350,000 home today to double in around 9 years’ time.

Some areas will do better than others and that’s where TIPS can help and give you an idea of where, how and why but most importantly, what’s best for you. We will work in conjunction with your accountant and / or financial planner to help you get started.

And don’t forget, it doesn’t matter where you live in Australia, you can still enjoy the benefits of investing in great investment properties in Adelaide. It doesn’t matter where the property is as long as you’re getting a great return. In fact, one of Adelaide’s most popular builders sell a large portion of their homes to people who live in Western Australia!

TIPS goal is to help teach everyday people how the property investment world works. If you would like to know more, please call us for a free, no obligation meeting.

Thanks for taking the time to read my article and letting me share my knowledge with you.

Cheers until next month

Fred Rasheed
CEO – TIPS

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