How Sydney, Melbourne investors are navigating today’s property market

After all, the property market moves in cycles – following a property boom, Sydney and Melbourne are now declining before hitting the bottom and eventually recover, poised for another boom.

At the moment, opportunities have already sprung out of different parts of both capital city markets, prompting investors to reassess their strategies and prepare themselves to jump back into the market.

According to finance broker and investor Aaron Christie-David: “They've probably been locked out of the Sydney and Melbourne market for quite some time, the last three to four years, going, ‘It's too expensive to get into the market.’ Now we're seeing some opportunities come in.”

“What we're saying to them is, ‘Be very selective about the opportunities that you're taking on or shortlisting,’ but yes, there will definitely be opportunities coming up in the next one to two years, I believe.”

Strategy

Instead of buying or selling properties, most investors across Sydney and Melbourne are focused on working out the strategies that can help them maximise opportunities should they present themselves in the near future.

Moreover, smart investors are keeping their finances in check so they can navigate the tighter credit environment with ease.

At this point in the market cycle, Mr Christie-David encouraged investors to deleverage.

He explained: “Maybe you can lose expensive liabilities like a car lease, for example, or cut off credit cards and tighten up living expenses. These are really good money habits to be having.”

Further, smart investors take note of the current and possible changes in the property market such as the shift in property values, the tightening of the credit market, the regulatory interventions on finance and the implications of the banking royal commission and the upcoming federal elections.

To mitigate risks, they not only establish cash buffers but also allow themselves several options in terms of financial strategies.

“The smart investors also go, ‘How do we get our house in order?’ So, they might get a line of credit organised, for example, because that's probably one thing that's going to start tightening up. The banks are not going to let you actually release the equity as well. Overlaying that is the fact that we're seeing some softer valuations.”

“Another thing that wasn’t around a few years ago is postcode restrictions. So, if you bought off-the-plan and that comes in short in terms of valuation, then you’re restricted around which banks will lend to you on the basic of loan-to-value ratio and if they've got postcode restrictions. You could run low on lenders because they have what they call exposure limits on buildings and developments.”

“Right now, it's all about making sure that you've got two or three backup options so you're not stressing out if opportunities come up,” according to Mr Christie-David.

Due to the several changes happening across the property market, particularly in the finance sector, Mr Christie-David encouraged investors to engage professionals, where appropriate, to help them navigate the shifting markets.

Mortgage brokers, for instance, give investors an insight on the different lending options available to them based on the goals, capabilities and limitations, both personal and financial. They also ensure that they are up-to-date with the current lending policies so that they could recommend the best strategies that can help investors maximise opportunities in the current market.

No doom and gloom

At the end of the day, Mr Christie- David reminded investors that, like any other property markets that have declined before them, Sydney and Melbourne will eventually recover as they are supported by strong population growth and interstate migration and, ultimately, booming local economies.

They are, therefore, encouraged to shut out the noise and focus on reassessing their strategies so they could capitalise on opportunities that will come.

“There's still banks lending, there's still interest-only products. Some banks are kind of moving in and out of rate, but you don’t have to chase the rate. Don't worry about that.”

“It's not all about the rate. It's about the conditions, the policy. It's connected with whether or not the property can do a specific purpose for your portfolio.”

“Just go to the right lender, implement the right strategy that's going to help you to build your portfolio, pay down your debt and achieve whatever your goal is at the moment, specifically the next two to three years. Really get clear on what your goal is and find a lender that's going to meet those needs in within that time frame,” Mr Christie-David concluded.

Tune in to Aaron Christie-David's episode on The Smart Property Investment Show to know more about the strategies that can help investors succeed in the property market this 2019.