Many investors are debating whether it is the right time to buy, considering the combination of falling property prices, interest rate hikes, tight rental market and strong rental returns.
Here are some things to consider if you want to buy in this market downturn.
1. Seek opportunities
Stay positive, and don’t panic during market downturns. There are always good investment opportunities if you do your research. Rising interest rates can scare off many buyers, but average new variable rates are lower than they were three years ago, and declining prices might make it easier for some to access a loan. Do your sums and seek financial advice to see if buying now at a lower price with a strong rental return will pay off and cover the cost of raising debt. Always consider the worst-case scenario and leave a cash buffer!
2. Buy for the long-term
With property investing, think medium to long term, it is not a get-rich-quick scheme. Set long-term investment goals. If you buy now, hold to take advantage of the property’s capital growth over time as it moves through the property cycles. Leverage the growing equity to purchase another investment property when an opportunity arises.
3. Diversify your portfolio
Another way to minimise risk in a market downturn is to diversify your portfolio by investing in different states, regions and cities and different property types (house, townhouse or apartment) and choosing the right investment strategy for that property and location. Do your research and due diligence on where and what is best to buy. Australia is not one market, and different cities and regions will perform differently during the market downturn.
4. Take your time
A good investor is a patient investor. You might have heard the saying that wealth is the transfer of money from the impatient to the patient. Do your research and due diligence to invest in the right property in the right location, and don’t rush into it because you fear missing out on a particular opportunity. Buy in robust suburbs that have performed well over the past 2-3 property cycles or 14-20 years. Analyse the suburb’s profile closely to determine how easy it will be to keep your property rented and maximise returns and capital growth over time.
5. Don’t get caught up in the media hype
In times of economic uncertainty, we see big stock market value falls. If you look at property prices historically, Australia’s last recession did not result in a fall in property prices. This is because credit availability is the factor most likely to send house prices downward. Supply and demand for housing is also a factor that will impact property prices, and currently, rental vacancy rates are low and there are housing supply shortages compounded by Covid.
The property market has fluctuations, but property values have consistently kept growing over time despite the major events in the market that have impacted them. Property is certainly less volatile than other investments like shares. It is a more robust investment class to invest in, even during the uncertain times.
For more information on how we can assist you in sourcing, negotiating and securing an investment property, email us at firstname.lastname@example.org.