5 Things to know about the Property Market
Australians love property – if we needed any further evidence of this fact, the past couple of years have shown us that regardless of what is going on the world, property investment is the favoured form of improving the financial position of thousands of everyday Australians.
Unfortunately, however, not all of those who play this game win – whilst most investors have probably benefited from the booming market of the past 18 months, growth appears to be moderating and it seems prudent to reflect on some tried and tested concepts tied to property investment as we all regroup from what has been a very unusual period in history.
- The property market is cyclical
The property market has a repetitive nature, meaning that no single market condition will last forever. It’s difficult to speculate when the market will move from one stage in the cycle to another or how long each stage will last. What we can say for certain is that for every boom or expansion in the market there will eventually be a recession or contraction (and vice versa).
- Properties that have a good location are more likely to grow in value
The property market can be unpredictable especially when hit with unforeseen circumstance e.g. a global pandemic. In the last two years, the housing market has performed strongly despite the number of Melburnians that chose to relocate due to harsh lockdown restrictions and whilst the top performing areas in Victoria for 2021 include many coastal and regional suburbs, the longstanding fundamentals of location such as access to schools, public transport, etc remain just as valid now.
- Make sure you have a plan to follow
Many players in the property market are confident in making money during an economic expansion. However, to be successful, you need to have a plan or a system to follow that can work and adapt to any kind of market environment. As stated earlier, the market, now more than ever, is unpredictable and having a plan that will hold to up to all conditions is vital. The other crucial aspect of having a plan is that it takes emotion and guesswork out of your decision making – the subjectivity of human emotion makes for some poor investment decisions…
- These things take time
One of the most important things to remember when choosing property investment is that it won’t turn a profit overnight. Investors need to understand that this form of investing will require time and patience if you wish to reap the rewards. Due to this, many people find that they don’t have the tolerance or commitment for this kind of investment, finding themselves wondering why ‘it’s just not working out’ after only a few years. Unless you have a 5 year minimum investment horizon (preferably 7-10), perhaps property is not the right investment vehicle for you.
- Make sure it’s right for you
It is crucial to make an educated investment decision based on your financial situation, expected return and risk appetite. There are several properties that can be considered a traditionally ‘good’ investment; however, they won’t be suitable for every investor. It is important to ensure that you are selecting a property that is not only a good option to buy in achieving the obvious goal of producing capital growth but one that will benefit you in the context of your overarching financial plan.