What goes up, must crash back down to earth … it might be true for gravity, but not, it seems, for owning an investment property.
Yes the boom phase is over, but new figures show that rather than continuing to fall, house prices are set to pick up. This is despite those headline predictions of a crash… it’s apparently still coming.
March prices were down month-on-month by just 0.3 per cent in Sydney, 0.2 per cent in Melbourne and 0.1 per cent in Brisbane, according to business analysts CoreLogic. ANZ Banking Group economists are also forecasting growth this year of 1.8 per cent, rising to 3.6 per cent in 2019.
While this is bad news for speculators looking to make a quick buck, it’s good news for looking at long-term investment property.
Tighter lending restrictions are in place but, if you do your homework, it’s a perfect time to buy your first investment property.
Here’s somethings you need to know about the current market:
- The heat has left the market and prices are at the lowest point of the cycle
- Population numbers in the east-coast capitals are surging, driving the rental market: Sydney and Brisbane each have a growth rate of 2 per cent, while Melbourne’s is at 2.7 per cent
- The Reserve Bank of Australia looks set to keep interest rates at their current lows until at least 2020
But before making any major financial decisions, consider the following tips:
Do your research
Houses in desirable areas will always be in hot demand and, as a result, carry a premium price. That’s why people have being snapping up cheaper new apartments. But they come with a caveat.
The glut of new builds has led to a rise in unscrupulous spruikers. Companies selling the properties on behalf of developers often market themselves as property investment companies, pushing lower quality units at premium prices.
That’s why it’s essential to do your due diligence. Ask local real estate agents for their opinions on values and rental prices. Never rely on solely one source of information.
Have a plan
Before you start, define your investment goal, timeframe and what you hope to achieve along the way. Why are you investing? Is it for your retirement or your children’s education? Are you looking for long-term rental returns, and are you aware of a landlord’s responsibilities? Also, do you have an exit strategy? Without a clear view of your objectives, you won’t be able to plan ahead.
Do your sums
Lending standards are tight, so consider talking with a mortgage broker to find out more about products from first and second-tier lenders.