Over 50% of investors relying on past performance
An over-reliance on past success can pave the way to becoming too complacent and result in an investor’s downfall, but more than half of property investors are falling for that comfortable trap.
When polled by lender ME about what gave investors confidence that their investment was safe, 56 per cent of investors said that house prices have always gone up in the past, while 11 per cent said that if others are buying investment properties, it must be safe.
Meanwhile, 34 per cent said that they use advice or analysis as the basis for their confidence.
Patrick Nolan, ME’s head of home loans, said that these results paint an alarming picture that investors need to be moving forward with objectivity and as many facts as possible available to them, such as location and various supply and demand factors.
“Your investment timeline is another important factor: the longer you’re able and prepared to remain invested, the more likely you are to see growth,” Mr Nolan said.
“Some other factors to consider include population growth, surrounding infrastructure, employment, education and lifestyle facilities — which can influence a steady rental income stream and the long-term value of the property — as well as the age, condition and how much upkeep the property will cost in time and money to keep it attractive to tenants.”
Mr Nolan also pointed out that the Australian property market is not one simple market and is made up of multiple different ones all moving in different directions.
“While Perth is currently recovering from a downturn, Melbourne and Sydney are growing, albeit not as fast, while growth in Hobart has improved,” Mr Nolan said.
“Apartment development in Brisbane, Sydney and Melbourne are also at record high levels, with some commentators speculating supply may outstrip demand in the short term.
“In the end, analysis and advice is the best basis for making any investment decision, particularly if you’re tempted to rely on past performance, or indeed if you are basing your decision on what other investors are doing.”
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