‘Don’t get caught in the FOMO trap’ as pre-GFC wins surface
Despite a newfound confidence buoying the property market, a buyer’s agent has warned against buying just for the sake of buying, despite the existence of opportunities that haven’t been seen since the post-GFC period.
Steve Waters, the director of Right Property Group, has said that for sophisticated and educated investors, there are some opportunities to be found in a housing market influenced by “a trifecta of good news”.
He listed off the election result leading to a maintenance of gearing policy, the potential for a releasing of the handbrake around lending due to APRA policy changes and the decision by the RBA to instigate two consecutive rate cuts as putting “an element of confidence back into the market”.
“As time goes on, as we fast forward from the election to today, we’re seeing days on market with properties in select areas really starting to shorten, and in some cases, they’ve halved,” the agent offered.
“What that’s showing us is that consumer confidence has re-entered the market, but also, equally as important, so has the confidence of the selling agents.”
Despite the good news, Mr Waters did err on the side of caution for potential investors.
He warned those thinking of buying to “make sure that you have a very solid plan in place”.
“What we will see is the general media coverage start to talk about how much of an awesome time it is and ‘let the good times roll’ so to speak,” Mr Waters said.
“Don’t get caught in that trap of FOMO.”
For those who are tempted to buy in the current market, Mr Waters emphasised how important it is that investors “don’t forget the fundamentals” of investing.
“Make sure your budgets are in place, [and] make sure you have you have your buffers in place,” he cautioned.
He said good budgetary measures and cash flow management will hold you in good stead for the future, where “cash flow is always king”.
“While the value of properties might go up and down and sideways over their cycles, if you look at the worst-case scenario, not many, if not nobody really ever loses property in a stressed scenario due to lack of equity – it’s usually a lack of cash flow,” he explained.
As a result, “cash flow is always king”, with Mr Waters considering cash flow management as always being the front-of-mind consideration when buying.
That’s not to say that buyers can’t be “extremely opportunistic” at the present time.
“Be in a position to execute the opportunities as they present themselves,” he continued, adding that investors shouldn’t just buy for the sake of buying.
“Every property has an absolute reason to be in that portfolio, it’s not a matter of just adding another front door in your portfolio,” Mr Waters commented.
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