If you are influenced by popular opinion, then you’ll probably be sitting on the real estate side-lines right now, at least as far as property investment is concerned. General sentiment is that the Australian property market is ‘crumbling around our ears’ or ‘falling at record levels’. Such emotional language in the media is designed to do only one thing – fan our fears – and for many of us it’s working.
The reality is that home prices in major capital cities have experienced consecutive monthly falls for almost a year and lending conditions have become very difficult as a result. Attendance at auctions is down, so clearing rates are at an all-time low, and the length of time properties stay on the market is steadily rising. So yes, all of that is happening, but your response comes down to the perspective you choose going forward. It’s human nature to err towards secure and safe choices, but property investment is about risk management. You need to decide if you are one of the few investors brave enough to prioritise opportunity over safety, in a climate of fear and uncertainty.
The cyclical nature of property markets and the general stability of the Australian property market, means that the upward climb out of the trough is inevitable. Your reward could be delivered tenfold in the form of considerable gains when the upturn arrives, and arrive it certainly will. The question is; will you pull away from the masses and steel yourself for some contrarian investing?
So, what and where are the current opportunities and how can you maximise them?
Better lending options
No that’s not a typo. It’s true that lending conditions are particularly tough right now, but it’s also true that the banks are going through a very challenging time with the Banking Royal Commission putting customer confidence at an all-time low. As a result, private lenders are working much harder at putting together great deals for investors, utilising their flexibility to be able to customise lending solutions and match the right borrowers with the finance best suited to their choices.
Bargain shopping AND value for money!
The climate of fear also impacts on how people price their properties to sell. Panic about managing mortgages and fear that properties won’t sell, combine to create a powerful vortex. Because a smaller pool of buyers has a wider selection of properties to choose from, they hold more power than home sellers have been used to in recent years. With every poorly attended open house, vendors lose a little more hope and properties that may have been sold well above their value a year or two ago are now selling for perhaps as much as 8 to 10% less in parts of Sydney & Melbourne – even more in the upper quartile of the marketplace.
Buyers have more power
A big part of success in real estate is about psychology and right now the ball is firmly in the buyer’s court. With so little competition, buyers now face decisions not all that usual to them; which amazing, reasonably priced home will they choose, of the many that are now options?
Vendors in some marketplaces are bypassing the traditional route of marketing and auction preparations, fearing that their property will be passed in and, perhaps in some cases, that they’ll end up with debt rather than profit, or even just a clean slate. Many agents report that off market transactions are becoming more common and buyers are much better placed to make a slightly lower offer AND have it accepted, than they would have been a year or two ago.
Consideration of other markets
With the markets consistently slowing in the major capitals, rethinking your investment strategy might therefore not be a bad thing. Growth has been steady in cities like Adelaide and Hobart and this is expected to continue over the next 3 to 5 years. These cities also offer great lifestyles, if you plan to live in your new property or need solid reliable tenants.
As always with property investment, do your research, know what your long-term property investment goals are, and focus on choices that will help you to achieve those goals. Whatever is happening in the current climate should be considered, but it shouldn’t motivate your decisions entirely. If there is a great property available at an unbelievable price, don’t jump on it like a hungover bargain shopper on Boxing Day. Nothing is too cheap if you don’t need it. Focus on quality properties, that fulfil your goals in areas that have historic records of strong and stable growth, with more of the same predicted for their future.