So You're Thinking About Buying A Property......

September 30, 2015
Vicki Wisely

So You're Thinking About Buying A Property....

Like most solid investments, property can be a great way to invest.   It’s easy to understand, easy to access and if you take the time selecting your property, delivers solid financial returns and benefits. 

Property can also be versatile and you can be really creative with some of the options you might have available.  

  • You could choose to live in it yourself and simply wait for the growth.
  • Perhaps you could purchase a run down property and sell after renovation.  
  • Maybe you could rent out your current property and purchase another house for you live in.  
  • With the right sized block you could look into subdividing, or maybe 
  • Stick with the more traditional purchase of an investment property and put a tenant in place.

Property investment is not usually meant for the short-term and you need to be prepared to hold on to your property for 7-10 years.  There are no guarantees, nor ways of predicting how much return you will make but the good news is that returns can come in several ways - rental income, tax benefits and capital growth (the properties growth in value above the cost of what you actually purchased it for).   

The Facts, Stats and Understanding the Lenders

Mortgage Choice data shows property investors currently account for more than 40% of all loans written. Further to this, a new survey undertaken by Mortgage Choice found, when asked where they would be most comfortable investing their money 40.9% of investors said property, while 37.4% said shares. When asked “Why?” almost 50% said investing in property allowed them to set themselves up financially for the future. 

According to recent Core Logic research, property prices in Melbourne and Sydney were recording 4.9% and 3.3% respectively over the course of July.  However more recent figures indicate that the Sydney market in particular is showing signs of cooling down.

So why is this important?

The Sydney and Melbourne market is in a phase known as a ‘sellers market’. Low interest rates, reasonably good employment rates (and sometimes an unstable share market) can combine to create the perfect buying environment.  Essentially, there are more buyers than sellers.  

So with short supply and eager buyers in nothing short of a buying frenzy, sellers become capable of pushing ‘asking prices’ skyward. This is when prices become extreme.

The flow on from this is that the Sydney & Melbourne property owners and investors who chose to sit tight or were quick enough to buy at the beginning of the market movement, may now have access to a large amount equity in their properties and strangely, this could flow on to the South East Queensland area. 

So what happens now? 

As the Sydney and Melbourne cycle starts to cool, there is a possibility that those who are purchasing at the top end of the cycle could lose money as the market traditionally cools / corrects itself. 

Prices contract because the maximum selling price is beyond what buyers are prepared to pay.  Now in order to obtain a sale, serious sellers will have to lower their asking price giving the appearance that prices are crashing.  

The ‘market correction’ occurs very quickly and once it completes itself, the market settles and a ‘top price point’ and ‘median’ are set.  The frenzy is over for the next few years as it reverts to a 'buyers market' or an 'even market'

The major downside to this event is that those who paid the top asking price before the market correction occurs may end up with a property that is worth less than what they paid for it. 

How could this be good for South East Queensland and the Robina area? 

When there are still interested buyers and economic conditions are still positive (interest rates etc), usually a new ‘hot spot’ will appear – and the current indicators point towards SE Queensland and the Robina area being that spot. 

There are many reasons why people buy property but the current Sydney / Melbourne market is making it difficult for at least 5 types of buyers.  These buyers could easily find a solution in the current Gold Coast, Robina market. 

  • Savvy Investors will already be realising that there is limited money to be made in Sydney and Melbourne. They will be starting to hold onto their purses and look elsewhere
  • First Home buyers who are simply getting priced out of the market might be prepared to relocate
  • Those on a limited budget looking to invest or re-enter the market
  • Upsizers (eg apartment to house) would gain from selling a smaller property in a Sydney or Melbourne market and achieve more value for money in the Robina area
  • Lifestyle changers.  Those who want to move to a waterfront, beach, golf course, elevated views etc may have been priced out down south but they find more affordable property and a greater range of options in our Robina area.

In a sellers market, the main winners are the downsizers, down graders, sellers who leave the market or those who use the equity in their property to renovate or invest.

Why South East Queensland and the Robina Area?

According to .id.com.au and several other sites who provide statistical data based on Census information, in the Top 10 Largest Australian Cities and Towns by Population, South East Queensland holds 3 positions

Sydney and Melbourne respectively take positions 1 & 2. Brisbane holds 3rd, and interestingly Gold Coast-Tweed is 6th and the Sunshine Coast comes in 10th.  (Wikipedia shows the Sunshine Coast in 9th position).  These 3 Queensland cities also show 5 year % growth above 10% up to 2013 (the last census).  

The Australian Bureau of Statistics (or ABS) who conducts the Census, shows that Brisbane is the ‘only capital city to decrease in share of state population over the last 40 years, down from 51% to 48%. This reflects comparatively stronger growth in areas such as the Gold Coast and the Sunshine Coast.’  Meaning that unlike any other capital city in Australia, we are both prepared and able to live outside of our capital city in our two strong satellite areas of the Gold and Sunshine Coasts.

How Can You Tell?

Major development companies are returning with full faith and investing heavily in the expansion of the Gold Coast. Interest is returning from overseas investment purchasers and tourism also is back on the upswing.

Development for the Commonwealth Games facilities is commencing all over the Gold Coast, including the upgrade to roads and public transport.  Major works are well underway on icons such as Pacific Fair and Jupiter’s Casino.  The Robina Town Centre has also revealed a whole new section.

Without doubt, prices in the Robina area are on the up.  Here at Mortgage Choice in Robina, we are certainly seeing a rise in our rate of enquiry.  We are also seeing a rise in clients who are converting their pre-approvals, to property purchases.

Even David ‘Kochie’ Koch is tipping a Gold Coast property boom in this interesting article from September 28, 2105 http://www.goldcoastbulletin.com.au/realestate/leading-financial-commentator-and-sunrise-host-david-kochie-koch-says-coast-property-looks-good/story-fnjdgobq-1227546454122  

If you want to make an appointment with Renee at Mortgage Choice in Robina, call us on 07 5562 0748 or email renee.polden@mortgagechoice.com.au if you have any other questions that you need answered.

Watch our short Money Chat video/s helping to answer commonly asked financial questions.  They are easily available on our website https://www.mortgagechoice.com.au/renee.polden/videos  

or 

our YouTube channel https://www.youtube.com/channel/UCo3L7Iby2ogM-_awtMATxvg :

  • How can I get started with investing?
  • Unlocking equity to invest?
  • The home loan application process?
  • How does a Mortgage Choice Broker get paid? 

To read more information on investing or finance and property visit our blogs page: https://www.mortgagechoice.com.au/renee.polden/blog

*This Information is based on opinion and should not be viewed as advice.  If you are considering investment of any kind, we strongly recommend discussion with a financial advisor first.

 

Posted in: Property market

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