If you’re thinking about setting out on a property investment journey, you’ll probably want to know whether the time is right.
What’s the market doing? What about the economy? Is it the right time to take the plunge or should I wait until the whole COVID thing has settled down and conditions are more favourable?
Well, think of it a bit like this. Have you ever been wondering if it’s too early in the day to have a drink and then one of your friends says “It’s 5 O’clock somewhere”?
We’ve all probably heard this at least once.
And while we’re by no means suggesting you take up drinking in the morning, the message is that there are many time zones in the world and at least one of them will suit your purpose.
It’s the same for property
We often hear the media talk about ‘the Australian property market’. Usually they talk about it booming or crashing, or being overheated or under-supplied… but the fact of the matter is that there’s no such thing as one big, Australian property market.
Rather, there are hundreds of thousands of micro-markets. Within Australia there are multiple states and territories. Within those there are many more cities, towns and regions. And within those there are so many suburbs, and even more neighbourhoods. And don’t get us started on the streets. And the properties within these micro-markets are completely different. Ask a farmer in remote central Queensland if they are in the same property market as the young professional in an apartment in inner Sydney or Melbourne… it’s like Mars and Venus.
So, what’s your point?
Well, with all those different markets, there are also infinite different characteristics. There are tightly held inner city suburbs in Sydney, Melbourne and Perth; there are speculative mining towns in the middle of nowhere; there are coastal growth hubs; rural wine regions; expansive suburbs on city fringes known for their acreages; government housing zones becoming gentrified; greenfield sites primed for shiny new suburbs packed with house and land packages; new development corridors surrounding airports and universities; the list goes on.
The many markets in Australia peak and trough at different times. So when one city is overheated, there will be another city, or town, or region, that is about to experience a growth spurt. It’s just a matter of doing your research and making the right decision.
The value proposition
The best time to buy is when you can get value. Just look at the man widely regarded as the world’s best share market investor. His name is Warren Buffett, he has a net worth of almost US$79 billion and he’s the seventh-richest person in the world. He puts his faith in his research and hard work, so that when he likes a particular company, he is able to swoop in and take advantage of a market fall and buy the stock that he wants for less than he thinks it’s worth. When the market bounces back, he makes money immediately.
His principles can be applied to property investing. Say you have your eye on a suburb in the middle ring of a city area, but the property there is out of your price range. Or it’s too hard to get it at a price that offers value and return on investment, because the area is in high demand and there’s too much competition. Then, along comes COVID and everyone gets spooked. People are guarding their money just that little bit more carefully and, in the immediate aftermath, there’s a market shock or correction and asking prices come down 10 per cent and into your price range. You know the suburb is a great location. All the numbers stack up. The vacancy rate is low, the rental yield is still solid and the demographics are all good.
So what do you do?
Well, if you have faith in your research and knowledge you dive right in and grab that investment. And in a year, or two, or three, when COVID fades from memory, the fundamental benefits of the property and the suburb still remain. It has likely regained its value, and maybe a little bit more, and you managed to buy in for below market value.
So, is it a good time to buy property? Well, it’s 5 O’clock somewhere.
