It has been a crazy year for the property market.
The affordability debate heated up as prices soared in Sydney and Melbourne.
Experts began to question the future of negative gearing and stamp duty as first-home buyers were pushed further out of the market. Home loan costs increased, construction numbers for apartments exploded and foreign investors were hit with big taxes.
So what’s in store this year?
Ben Kingsley, chair of Property Investment Professionals of Australia (PIPA), says investors will need to get creative to overcome affordability problems and to steer clear of areas inundated with apartments.
“With more potential downside risk in our major markets, investors need to be strategic about their investment approach,” he says.
Here are Kingsley’s six tips for tackling this year’s property investment.
1. Look out for higher borrowing costs
Home loan costs are starting to rise. Six lenders have recently lifted their variable rates, including all the major banks. With principle borrowing costs already high in Sydney and Melbourne, growing interest rates won’t come as good news. If you’re looking at the investment market, Kingsley says this is certainly something you should consider.
2. Consider co-ownership
If you can’t get into the market yourself, or you’re uncomfortable taking on so much debt, you could consider going co-borrower with someone you trust. That means you give that person equal share in the equity of the home, and as such you both have equal responsibility to repay the loan.
3. Go “borderless”
Kingsley recommends thinking outside the box. He encourages investors to consider opportunities interstate, outside areas they know, and investing in cheaper, more competitive markets.
4. Beware the apartment glut
The outlook isn’t so good for apartments. Sydney, Melbourne and Brisbane have recorded sky-high construction levels for CBD and inner-city apartments. With apartments heading towards oversupply, Kingsley recommends investors tread with caution. Bargain hunters might be able to take advantage of distressed sales further down the track.
5. Focus on the long term
Speculation can be bad for markets, so keep your long-term goals in mind when making decisions. Kingsley says investors should remain cool, calm and collected and avoid making irrational decisions based on fear.
6. Seek help
When there’s a lot at stake, it’s wise to get a professional opinion before you jump in. You should consider hiring a buyer’s agent, mortgage broker or qualified property investment adviser who can help you to find the best property at the best price.
Money Magazine, 4 January 2017