One of the most important processes that any investor should undertake before making a property purchase is to thoroughly research and analyse the current state of the real estate market. This will involve the taking into account of several different factors including, but not limited to, dwelling values, interest rates, domestic and international economic conditions, market forecasts and of course, the opinions of experts.
To this end, I've decided to share the following article by Empire CEO, Chris Gray, which appeared in the September edition of Century 21 Wentworth's Property Investor.
Now might be a great time to enter the property market
The sentiment of doom and gloom out there might tempt many of us to hide under a rock until the economy takes a turn for the better. Very few of us realise, however, that a sluggish economy might actually present some hugely attractive opportunities for those with the capital to invest.
The property outlook
Take a look at the current property market, which in recent months has endured:
Falling mortgage interest rates
Low vacancy rates in many areas
Rising rents; and
Buyer uncertainty
Even though the Federal Government has boosted the first home owner's grant, many real estate agents have reported that buyers are continuing to resist until the market looks more certain.
Profitable times for investors
If you're looking to invest, however, you couldn't have picked a better time to do it. While there is a great deal of negative sentiment and uncertainty in the marketplace, cashed-up investors with a long-term strategy may be able to secure some reasonably priced investments.
The potential for strong profits is promising: mortgage rates are falling towards the six per cent level - and some banks are now fixing mortgage rates at under five per cent for three years.
The gap between rents and mortgages could close to less than one per cent. For a property investor, this could translate to a net cost of less than $5000 per year on a $500,000 property - it rarely gets better than that.
Previously, properties were costing investors up to $20,000.
The time is right
At the same time, demand for median priced property is still strong in the inner-city rings of most capital cities. In addition, the fact that there isn't a great amount of available land to increase supply, could very well translate to rising prices.
There may also be some great opportunities for new home owners that can take advantage of the first home buyers' grants. As long as you can pay your mortgage, even if property values do drop slightly in the short-term, you can likely secure a more affordable property now than when there's more confidence in the market.
My own strategy
I buy median-priced property within 5-15 kilometres of capital cities. These appeal to the majority of renters, ensuring consistent yields, and can easily be resold for a fair price in case of an emergency. While there are bargains to be had in many states, it's often worth paying a fair price for a blue-chip property rather than getting a discount for something that is not in demand now nor will be in the future.
About Chris Gray
Chris Gray is CEO of property portfolio company Empire. He is a leading property expert who provides opinion and commentary regularly on Sky Business News, A Current Affair and other news media. He is a regular columnist for Real Estate Journal (REINSW), Queensland Property & Lifestyle (REIQ), Your Investment Property and other property media. Through Empire, Chris today builds property portfolios for time-poor investors - searching, negotiating and renovating on their behalf. For a FREE copy of his latest book, The Effortless Empire: The Time-Poor Professional's Guide to Building Wealth from Property, visit www.yourempire.com.au.
For more information on investment opportunities in your area, please contact your local Century 21 real estate agents.