Working out the right property to buy is one of the most difficult things for many Australians, particularly if it’s their first. Many bought their home based on what worked for them, but when it comes to buying an investment property they use completely different logic.
The number of people thinking about buying a studio apartment, defence housing, student accommodation or any other kind of ‘cash cow’ property always amazes, but is swiftly put into perspective with this simple fact:
‘Investors make up just one third of the market – more than two thirds of properties are purchased by owner occupiers.’
This seems obvious, but if it were that obvious then why would so many people want to buy something that would eliminate two out of three potential buyers? On top of this, investors are usually much more astute, and will not get emotional about a purchase and be willing to pay a premium.
This is one of the key messages that Blue Wealth has – never purchase something that will severely limit your exit strategy.
So what about someone buying their first home; can that still work as an investment?
The answer is, ultimately, yes – as long as you appeal to as broad a market as possible.
The broadest market (that of owner occupiers) can be separated into first home buyers (FHB), upgraders and downsizers.
Since June 2000 FHB nationally have averaged around 27 per cent of purchasers – from a low of 19 per cent (March 2007) to a high of 42 per cent (May 2009).
A lot is written about FHBs, mostly because if this segment of the market is active it is often a sign of increased confidence in the market and also gives those in existing properties the opportunity to upgrade (hence upgraders). Right now, FHB numbers are close to their nadir, at just above 20 per cent. For many, strong FHB activity is the ‘missing link’ in the current housing market recovery.
For this writer as an FHB the reason why this number is so low (and even worse in New South Wales, which has averaged just 12 per cent since November 2012) is clear – it’s tough to buy your first property! This is particularly so if you live in a capital city such as Sydney and want to buy close to amenities and employment hubs.
The solution of course is to use smarter decision making to get into the market, utilising grants and exemptions where possible. This is how you can afford to purchase your first home and make it work as an investment too.
If you know any FHBs trying to get into the market, invite them to a seminar or book them in for a meeting.They will thank you for it!