Is this the year I should invest in property? Or have I missed the boat?
At Mortgage Choice, these are two questions we get asked a lot.
Australians have long had an affinity with property. Over the years, property has proven itself to be one of the safest and most lucrative asset classes.
But, with property price growth stagnating across some markets, many Australians believe the time to invest has now passed.
However, this is simply not the case. Indeed, now is still a great time to invest.
Interest rates continue to sit at historical lows, which is helping to keep the cost of borrowing at affordable levels. Better yet, it’s widely expected that interest rates will remain lower for longer.
How do we know interest rates will stay lower for longer? Good question.
The Australian economy is performing well under a period of prolonged rate stability – a fact of which the Reserve Bank of Australia is acutely aware.
Interest rates have been on hold since August 2016. During this time, we’ve seen an improvement in consumer sentiment and business conditions. Moreover, the property market has started to regulate itself across most markets.
While lower interest rates did cause activity to spike in some areas – specifically Sydney and Melbourne over the past couple of years – price growth has started to slow down in these areas.
Across the country, property price growth was fairly subdued throughout 2017, which goes to prove that the low rate environment is not artificially stimulating the property market.
Data from CoreLogic found property values rose just 4.2% across Australia throughout 2017.
While this growth isn’t as strong as we have seen in previous years, it’s still good growth. Moreover, when prices start to come off the boil, it opens more opportunity for you to purchase a great home at an even greater price.
And if you’re worried that last year’s cooling property market is just the start of things to come and, as such, now’s not a good time to invest in property, don’t be.
The fact is, the property market is cyclical. Is goes through ups and downs. If your whole plan is to buy property, hold onto it for a few short years and then sell it for a profit, you’re doing it wrong.
As the old adage goes: successful property investment isn’t about when you sell it, but for how long you keep it.
The longer you hold onto an investment property, the more likely you are to see a significant return on your investment.
To be a successful property investor you should:
- Do your research: Look at the historical data for your preferred investment areas. What’s the average annual rate of return?
- Hold onto your property: Don’t take a short-term approach towards property investment. Be prepared to invest for the longer term.
- Speak to a professional: As an investor, you’ll need a specific type of mortgage and specific advice.