Today’s property market seems increasingly confusing and difficult to read. Certainly I feel that I am being bombarded with all sorts of stories in the news and in financial papers; a market bubble, a housing shortage, mortgage crises and so on.
With this in mind, I thought I’d reflect on whether today’s market is a good place to buy, sell or hold. There are, and there always will be, some important factors to consider.
1. Interest rates:
Interest rates determine the ease which we can afford to borrow for our purchases. Right now there seems to be talk that interest rates are headed down again. It seems, however, that this could change at any tick of the clock. Personally, I think that for any calculations made regarding property affordability, interest rates should be estimated at at least 9-10%. After all, you hold property for a lot longer than the short term. Best make decisions keeping in mind a conservative, long-term interest rate for your calculations. And if, as the pundits suggest, interest rates do drop then you’re at an advantage and can pay off your loans faster!
2. The many Australian property markets:
There isn’t just one property market in Australia – there are many. Even in the same location you might find that there are a few markets; the unit market, the first home buyers market, the established family market, the retirement market and so on. This is the reason why some statistical tables can be misleading – one location may have four or more different markets working at the same time and a median figure doesn’t take this into account. Rather than ask if now is a good time to buy property, look at where the opportunities might be. There are so many mini-markets in Australia right now that there will be good buys somewhere. All you have to do is find them!
3. Timing in the market isn’t as important as time in the market:
There’s an old real-estate investor’s saying that the most important thing is the time you’re in the market. Long-term investors sail through the tough times and enjoy the good times because, in the long run, property is a great investment. If you’re looking for a quick profit then property might not be for you (unless you are either very lucky or you have specific skills that can bring about quick profits in any market – and I don’t think these are ever without risk!). If you’re here for the long haul then perhaps the timing isn’t as important as some people suggest.
4. Do what everyone else isn’t doing:
Several experts (including American share billionaire Warren Buffet) say that the real money is to be made in bucking the herd, not following it. If common feeling is that property should be sold then possibly it’s a good time to look around for a purchase or two. In times when lots of people are selling there have to be some cheekily good buys around! Don’t be afraid to buck the trend – you never know, you might just end up as the next property millionaire!
5. Nobody knows:
Reality is that nobody really knows precisely when the market has bottomed while it’s happening. And nobody knows when it peaks either. Hindsight tells us these things. The best you can do is to complete all your research, get to know an area, understand the driving forces in that area, do your due diligence and make educated guesses. If we look for signs that perhaps things are strengthening then maybe we’ll be right. Maybe.
These are just five points to consider, and there are many more. Opinion will always be divided when it comes to buying and selling real estate (and any other asset for that matter). Ultimately the decision is yours and you can never be sure. As long as you do everything in your power to make sure you buy (and sell) well, that’s all you can do.
And good luck with your investing!