In the spirit of Spring Carnival and on the eve of the race that stops the nation, I’ve decided to highlight the similarities between betting on the horses and investing in property. The desired outcome is the same in both to maximise your return.
Buying a home, paying off the mortgage and living happily ever after. This is the starry-eyed dream that the majority of home owners have at the beginning of their mortgage. Figures from the Australian Bureau of Statistics reveal that unfortunately this idea is becoming less and less of a norm in our country. Since 2002, the number of 65-year-old Australians with mortgage debt has tripled. With the average retirement age in Australia hovering around 60 years, this is a worrying sign for future generations.
Research suggests that the average human makes 35,000 decisions in a day. It’s fair to say that fear is a major contributor to the decisions which we make. In property terms, how fear impacts someone’s decision is based on the market’s sentiment. In the growth phase within a cycle, the ‘fear of missing out’ is a major driver for demand. In the slowing periods of a market, the ‘fear of overpaying’ takes over.
After a solid 7-year period of market growth, Sydney siders are now experiencing a stagnation in their property prices. For first home buyers, this is a welcome change. Since 2012 these buyers have seen property prices grow faster than their bank accounts, making the idea of finally saving up a 20% deposit a distant dream. Now it seems there is a glimmer of hope for those trying to get into the Sydney market, giving many a reason to act and jump into a property while they can. Now this seems like an exciting time for young buyers, here’s why it may not be the best course of action.
We often find ourselves discussing the financial gap between someone’s current financial position and what is required for them to retire comfortably. The calculations take into consideration current income producing assets and the ideal annual spending figure needed throughout retirement. Generally, this results in a figure which exceeds $1 million and for many is seemingly unsurmountable.
Property is a long-term investment, that’s the bottom line. You should be working out your numbers with a hold period of at least 10-15 years, if you are considering investing. A long-term hold gives your property the maximum opportunity to go through as many growth phases as possible, allowing you to leverage off the natural cycle of a property market.
On October 7th the ‘Sydney Morning Herald’ released an article preaching that ‘if you wanted to become an investor, you need to stop reading the media headlines’. An ironic headline from one of Australia’s leading media outlets who in the past few months have published the below articles:
As an investor your ability to distinguish between good value and cheap property can be instrumental in your property selection. Understanding value is vital in purchasing the right property which in-turn can help to maximise your exit strategy and potential capital appreciation. Our research model is in place to ensure our property approval process acknowledges high quality properties which justifiably have a premium price.