Property investment is a well-worn strategy in Australia for personal economic growth, however like any financial decision it is one that must be carefully considered.
Let’s have a look at three main factors to be analysed as you firm up your decision:
The property market
The economic situation
Your personal circumstances
The property market.
Reviewing the key indicators of the property market is important and at this point it does not hurt to talk to a few industry specialists to get an initial reading of where the market is at. Keeping track of sales in your area of interest and reading industry trends and news will also help form your views.
Some of the general elements to determine include whether it is a seller’s or a buyer’s market; understanding this will give you a valuable idea on your negotiation power.
It pays to take the time to build a summary of what the real-estate performance is like in the suburbs or areas that you are targeting, as well as surrounding suburbs, and finding as much data as possible to create a clearer picture.
Infrastructure developments are another item to check on. For instance, government, both state and national, may have plans to build infrastructure that improves the livability of an area and makes it a possible longer-term investment prospect. Check on improvements or development in areas such as transportation and schooling.
As the work completion times are usually long for these major developments, you are also likely not competing with a homebuyer looking for established amenities.
The economic indicators.
Economic indicators are important, they are early signals that can influence the property market. This is because they affect a buyer’s confidence.
There are many economic indicators that can affect sentiment; aside from local and national economic growth, the way a global economy is moving can also affect the decisions that people make and the confidence or not that it brings.
It does not hurt to keep an eye on the indicator figures of Australia’s most important trading partners, such as China, Japan and the United States.
The numbers to review include the country’s GDP and estimates for growth. Investment and employment will sustain household wealth and customers for the property market, while a drawback could make the market more cautious.
Deciding what kind of investment climate you are willing to operate in is part of the decision-making process. It may be comforting to invest in a confident environment however it may also mean buying when the market is booming and prices are raised by demand. The flip-side to that is of course at what point to invest in a market that is softer due to perhaps economic uncertainty.
The next step is to take these indicators into account and then match them with your personal circumstances.
Your personal circumstances.
Life is an organic experience with unforeseen events, unpredicted career moves, unexpected businesses outcomes, growing families, the education needs of children… the list is endless and it can be difficult to know for sure where we will be in 10 years’ time.
However, one key matter relating to property investment we can all assess is whether we are today in a position to buy a property.
You may have recently come into some money, have just finished reimbursing a mortgage or have had a pay rise, and this may be the opportunity you want to use.
Property market and economic indicators may be moving in different ways and, as an investor, your job is to find a range of good advice and assess whether the time is right for you.
Property investment is timely experience. Finding the property that matches all your requirements can take some time and the purchase incurs significant entry and exit costs such as legal, stamp duty and capital gains tax. When embarking on this journey, investors should prepare a 10 or 15 year plan, keeping in mind that the longer the property is kept, usually the greater the outcome.
Amongst most financial venture it comes with its periods of plateauing, crashes and its euphoric growth, but as investment in certain areas has already shown it can deliver steady and safe revenue to the patient investor.Looking at the capital growth over a 10-year period of any reasonably selected area will confirm this. For example, Melbourne houses have seen their average price moving from $479,000 to $835,000 between March 2008 and February 2018*.
There are many indicators that are important when preparing for your property investment. Understanding their meaning and how one can affect the other will assist you settling on a strategy.
And then bringing the indicators into your personal financial circumstances will help create a picture of a considered investment.
The right time to buy an investment property is not when everybody can, it is when you can.