Despite national commentary showing properties have fallen due to the COVID-19 pandemic, investors who look beyond the national figures and focus on the micro will be successful, a researcher has explained.
According to the 2020 PIPA Annual Investor Sentiment Survey, which gathered insights from over 1,000 property investors during August, despite the falls in the market, Australians are optimistic about adding to their portfolios.
In fact, the survey found that 44 per cent of investors are looking to purchase in the next six to 12 months.
InvestorKit’s head of research, Arjun Paliwal, encourages these investors to enter the market, believing history could repeat itself from the last major fall.
During 2017-2019, when the property figures nationally were grim, Mr Paliwal explained how he was able to add to his personal portfolio.
“A personal example I can give. During that massive decline, I made four purchases in Burnie Tasmania during 2017, and since then, suburbs in that market have moved 30-45 per cent.
“That’s no small amount when the commentary is the market is falling,” Mr Paliwal said.
How did he do it?
Mr Paliwal explained that while headline figures are a strong starting point, investors need to understand it is a high-level number.
“It is important for buyers to remember that people who comment on national data are only doing so to capture maximum audience in one conversation,” Mr Paliwal said.
“It is impossible for any national media, market commentary, chief economist or the RBA to take the whole day to update every LGA in the country.”
Instead of focusing on the national figures, Mr Paliwal found stronger-performing regions.
However, the researcher’s own example shows that investors need to be quick with their purchasing.
“During that time, even though the Burnie market was positioning to strengthen at that moment of time, when entering the market I had very little competition,” Mr Paliwal said.
“When I was looking at that asset and buying it for myself, I found that everyone else was focusing on the national headlines.
“They ignored [the declines] were not an Australian issue but were impacting one to two pockets of the Australian market.”
“From there, I was able to execute a deal with very little competition. But that also changed because people within Burnie were looking at the national headlines going something doesn’t seem right. I have just been outbid multiple times,” Mr Paliwal said.
The researcher explained that once the market caught up, the opportunity to get the best out a negotiation was gone.
“Luckily, I achieved that, but that was going to change if I came in a little later.
“That shows the importance of micro analysis,” Mr Paliwal concluded.
Cameron Micallef, Smart Property Investment, 16 September 2020