What is really happening in the current property market, and how does it effect me?
Anyone who has been paying attention to the media about the current property market will notice a regular trend. Claims the property market is about to crash, housing affordability is worse than ever and banks are making it impossible to get a loan.
Bad news sells, and the media feeds on this selling doom and gloom to the general public. Unfortunately, there are all too many ‘experts’ willing to offer their opinion in order to sell a storey. The key is to look past the distorted facts the media portrays to get an understanding of what is really happening.
The property market operates in cycles, no different to the stock market. It experiences fluctuations, ups and downs, and truly successful investors such as Warren Buffet realise this to capitalise on the opportunity when others are busy reacting to the media. One of his popular quotes is “The stock market is a device for transferring money from the impatient to the patient.” This quote is equally relevant to the property market. The HIA Executive Director – Harley Dale, made a very relevant comment recently when he commented on the ‘outlandish calls after the growth cycle has peaked’.
So when you understand that what is currently happening is simply part of a normal cycle, what does it mean to each of us?
1. People who own property or have recently purchased
Unless you are planning on selling your home, what do you have to worry about? In some capital cities, your property value may have dropped on paper, but this is nothing to fear if you are planning on holding on to your property long term. While some capital cities have experienced a decline, there are many articles showing the Brisbane market, in particular, is still showing growth. Look at any capital city property values over the past 10 -20 years, then you will see what the Warren Buffett truly understands.
2. People looking to build a new home
If you have purchased a block of land and committed to building, there has never been a better time to do so. Interest rates remain at a record low, land is readily available with continued supply and many capital cities are still forecasting a shortage of supply over the next 5 years. Due to ever-increasing infrastructure fees from council, new land developments only ever increase in price, regardless of the market trends. If you think it is better to wait 6 months to purchase a block, don’t be surprised if it actually increases by $5,000 – $10,000.
3. People currently renting
While there is no hiding from the fact banks are looking to reduce their risk, they only make money by lending it, and this will never stop. If you are thinking of purchasing or building, then the sooner you enter the market the better. The key is to start with saving a decent deposit to provide you options. Then talk to a mortgage broker to find the right lending institution.
There is a lot of discussion at the moment about government scrapping negative gearing for investment properties. If this goes thru, the result for tenants longer term will be fewer rental properties being available, which will drive rental prices up. With interest rates at an all-time low, there will never be a better opportunity to enter the market.
The key to making the most of the property market is listening to the right people and learning not to pay attention to media myths.
If you would like to talk to a mortgage broker about the opportunity to build a new home, contact Preferred Homes today so we can put you in contact with one of the top brokers in QLD.