Strike while the iron’s not yet hot
It’s worth remembering that some of the best gains can be made when markets are flat.
With the outlook increasingly suggesting flatter property markets ahead the question many investors will be asking is ‘Should I buy now or should I wait?’.
Few pundits are forecasting any meaningful gains in property prices for the immediate future – at least not on a national basis. Sure, there will always be specific areas that perform well regardless of the broader market but these opportunities look like they will be more limited in the near future.
So with little prospect for capital growth in the short term what incentives are there for investors to make their move in the property market now?
If you’re looking for short term gains, this will be a challenging market cycle for you. For investors where turning a quick profit is a priority the biggest opportunities probably lie in developing or renovation.
While this has been a successful strategy for some, most investors generally look for longer term gains, so what does the current market represent for them?
With less competition in the marketplace for property on sales there is greater scope for the buyer to negotiate on price – and this should not be underestimated.
A slower market also means that properties generally take longer to sell so you have greater scope to take your time and pick your property carefully, rather than feeling rushed in to a purchase when things are running hot.
The other attractive aspect of a slower market for investors is the likelihood of rental growth. While fewer people might be planning to buy, they will still need a roof over their heads and that need pushes up demand for rental property.
With less buying activity, fewer developers are looking to construct apartments because there is lower demand for stock. This only serves to put more upward pressure on rents.
Whether you choose to buy now or to wait and save will depend on your own wealth creation strategy and appetite for risk.
If you decide to wait, the good news is that the market is unlikely to run away from you – you won’t miss the property boat. As prices look to remain flat, you might just want to beef up your savings or maximise your deposit so you can make a move when the market heats up.
Historically, however, investors have secured the greatest long-term gains when the property market is less than favourable. So, for those investors who are motivated and determined to move now, there might just be a significant opportunity.
True, you might not see an immediate return on capital growth but there are a number of other key benefits. Most notably, when the market starts to move everyone will be looking to get on board, so it’s good to get in early and ride the growth from the get go.
If you buy smart, the growth will come.
Investors are in a good spot right now: they have choice, buying power and time. In a market such as Australia – which is typically short of stock – if you bide your time and wait for markets to pick up you’ll either miss out or pay over the odds.