The 2019 Property Whip.
The Property Whip
I’ve seen property act like the shape of a whip three times in my life. My whip “shaped property measure” I describe starts in the Southern states, where property prices boom in kaleidoscope fashion, then the other states follow as southern investors see value in States like Queensland. Then the downturn arrives and the whip ends up cracking hardest outside the main cities of Sydney and Melbourne. The same can be said of higher valued residential property. (At first it does not seem to have an effect, in fact they still keep going up when lower valued property stalls.)
The Outlook Doesn’t Look Rosy!
Interest rates are rising. Rampant Chinese investment of the past has now slowed to a trickle. Australian banks are more exposed to property than anywhere else in the world, and as a result borrowing money is becoming harder.
No Debt is the Best Strategy
Sure, gearing has been my best friend in a rising market! I first started investing in property when I was 18. I bought an apartment in Morningside (Brisbane) and my Dad went guarantor for the loan (Thanks Dad). Purchase price $40,000 – Sale price $70,000 18 months later. I used the cash to travel. Property is a great investment option, but is it right to sell and make a profit or hold? (If I still owned the property, it would be worth about $400,000 today)
Mortgage in French means “Death Agreement”.
My rich Dad (Pete) said to me once. “A slave is better off than a mortgage debtor. At least slaves get free food lodging”.
Sell or Hold?
It all depends on your circumstances. I sold and spent the cash on a 6 month holiday in Sicily. This gave me so many memories where I connected with extended family. Those were irreplaceable life experiences.
Property investment is a core social need and significant commitment, and it can be hard for a new investor to take the first step. And there are so many people out there who aren’t even aware that building wealth for the future is important. There are so many people who are not even aware of the possibilities and options for investing. If you are aware and have the intention, then this is a big step in itself.
The Media is There to Startle
As negative headlines of plummeting property prices dominate the media – now more than ever, it’s important to be careful who you listen to.
But opportunities remain! Certain areas, suburbs and types of properties are continuing to outperform the wider market. Investors with strong financial profiles will realise that lenders will be competing for their business and take the opportunity to negotiate better rates and secure a quality property before the market becomes highly competitive again.
Look For Owner-Occupier Appeal
We expect to see a genuine difference between quality properties with owner-occupier appeal and ‘investor-focussed’ properties in 2019. Investors will need to be even more discerning. When you come to sell your asset, you want to be able to access the widest possible market. Investors also tend to make purchasing decisions less emotionally. Owner occupiers may be more willing to pay a premium for something they fall in love with.
If Labor gets elected next year and upholds their promised changes to negative gearing – which will favour new property – then owner-occupier appeal will be even more important for investors when and if they decide to sell.
Surround Yourself with the Right People
Be selective about who your advisors are! Building wealth through property investment takes time, and the right insightful advice! Even if you purchase the perfect investment property at the perfect time – this alone is not going to help you achieve financial freedom. The key is to build a portfolio strategically and then to hold those assets over the long term – and holding is easier said than done. But with the right support team around you, success in investment – as in anything in life – is far more achievable.