Can the financial crisis benefit Property Investors?

Should we invest? This is always a tough decision especially in the current climate.

Are there opportunities for property investors during this financial crisis? Where are they?

We all know it is getting cheaper and cheaper to own a property. Rents are rising, Bank interest rates are falling, tenants are almost paying all the bank interest.

Historically, Australian property has never displayed substantial falls especially in the median price ranged properties. We have seen as much as 20% dips for higher end properties in the above $800,000 to multi milion dollar property segment. Weakening of property values are also prevalent in the mortgage belts or outer suburban locations.

Fortunately, panic sale is less common compared to what we see in the stock market. There have also been pockets around Melbourne where properties are selling like hot cakes before planning permits have even been approved!

There are also properties out there that are being reserved by renters 3 weeks before the properties were even due to complete! So not all properties have to perform badly.

Australia’s banks have been more cautious compared to banks in many other countries like the US. Property developers in the current Australian climate have found it much harder to get funding for projects, causing delay of stock coming on to the market.

The ANZ Bank’s senior economist, Paul Braddick, said Australia faced a critical and potentially chronic shortage of housing. This growing housing shortage could logically lead to escalating rent and price explosion.

Substantial increase in migration for the past 4 years also means this will not be relieved anytime soon. 

Underlying housing demand was already outstripping new supply, and the hundreds of project cancellations should drive up housing demand to record levels.    

Commsec chief equities economist Craig James said a “triple whammy” of factors was paving the way for a boom once interest rates were cut again.    

“Not only is the rental market super-tight, but population growth continues to strengthen and speculation has shifted to rate cuts,’ Mr James said.    

It would make sense for investors to drift from other investments back into property. 

We have never seen a rental boom like this before and will possibly also have the lowest interest rates we have ever seen soon. It seems too good to be true doesn’t it? 

Let’s look at property prices following previous stock crashes?

1974: OPEC crisis/stagflation: ASX -59%.  

1987 crash and recession: ASX -50%.  

Using Melbourne apartments as an example, in the years following the 1974 crash apartments went up 31% by the end of 1976, and by 36% by the end of 1977.    

And within 24 months of the crash of 1987

we saw nearly 40% growth in Melbourne apartments.    

From this, it is tempting to move before further rate cuts. Once more people catch on that rates are spiraling down and rental yields and interest rates may be on par, competition for properties in this under supplied market is to be expected.  Classic supply demand imbalance.    

Always ensure you carefully assess your personal financial position and risk levels before entering the world of property investing. It doesn’t matter what your friends or relatives can or can’t do.

There’s also more to investing than surfing the net for free information, attending seminars or visiting real estate websites or asking the banks or accountants what you should do.

To learn more about the opportunities available to YOU, the risks and preventative measures you can take in order to become a safe and successful property investor, empower yourselves with our complimentary consultation. We can help you workshop options and tailor 1 on 1 education sessions around your personal needs.

Invest Wisely