Don’t worry – you can still invest in a time of upheaval
The future of property is more uncertain than ever, but there are opportunities amid the disruption for those who know where to look.
In a recent episode of Property Investing Insights, Right Property Group’s Victor Kumar and Smart Property Investment’s Phil Tarrant noted that Australia’s east coast cities are experiencing a period of unprecedented change.
Previously, it had been the undisputed goal of most Australians to own their own property, but times are changing and perhaps Australian aspirations are too.
“Not everyone wants home ownership,” said Kumar. “They’re quite comfortable paying the rent so that they have flexibility, they don’t want a mortgage, they’re at the stage in life where they want to earn money, have a good job, have a good social life, and have fun.”
Kumar compared the current context of cities like Sydney and Melbourne to major US cities where home ownership is no longer the norm.
“As it stands, if you are buying a house in Sydney, it is 11 or 18 times – depending which suburb you’re buying in – of your income. That’s a huge, huge outlay, and you’re shackled for 30 to 40 years.”
Instead of continuing to be a nation of home owners, Kumar suggested that Australia “may go down the routes of, say, New York where the bulk of people are renters, not home owners”.
Tarrant noted that the high cost of mortgage repayments has been exacerbated by extremely elevated interest rates.
“I don’t want to discount a lot of the strains and pressures a lot of people with mortgages go through right now. They’ve got mortgages at an interest rate that started with a two and now starts with a six,” Tarrant said.
In Sydney, Melbourne and Brisbane in particular, Tarrant said that the “entitlement that every Australian should have their own home to live in” is “a fractured mindset of many, many years past”.
As “big global cities” on par with Los Angeles and Chicago, Tarrant and Kumar noted that Sydney and Melbourne face greater challenges than ever in providing housing for all citizens.
“This will be a big contentious issue, we’re not going to solve it today,” said Tarrant.
As regulations change, market dynamics evolve, and holding costs increase, many investors face a difficult decision between dropping out of the property game or plunging ahead.
Kumar, however, warned investors not to despair.
He acknowledged that “they are investing at a time where there is upheaval”, but suggested that opportunities can emerge from the chaos.
“We know we are hugely undersupplied, so regardless of what’s thrown into the mix, the market is going to go up if your asset selection is correct.
“Your rent will continue going up, and it will go up even higher because there are less people investing, so the informed investor will grab it by the horns and actually make some good revenue in terms of growth,” said Kumar.
Listen to the full conversation here.
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