Buyers Market + Rising Rents = Profitable Investment

FIVE KEY TALKING POINTS

Now is a time of rare opportunity for investors. After several years of highly competitive markets and stellar price growth, the time is right for investors seeking strategic opportunities even while prices are still growing in many key markets across Australia.

Tim Graham from Reventon, guest presenter on a recent webinar hosted by Hotspotting, says investors are returning to the market.

In the webinar discussion with Hotspotting founder Terry Ryder, Graham revealed a number of key talking points: why you shouldn’t believe everything you read, now is a good time to invest, regional markets are good for investing, the most powerful tool an investor can use and why you should use a buyer’s agent.

Don’t believe everything you read

Graham says recent media reports on the property market focus on doom and gloom which is having an effect on sentiment. But he says the commentary is ill informed as the market is actually performing well.

“It’s hard to believe what you’re reading, when you turn up to an auction or a walk through, or an inspection on a weekend, and that’s telling a different story,” he says.

Graham says the media tends to refer to Australian as a single property market and the reality is there are many different markets throughout the country.

He urges investors to focus on the facts and keep an eye on the fundamentals as Australia’s economy is performing well, with unemployment rates at their lowest level in 50 years.

The population is continuing to grow and demand for housing will increase as more international migrants move to Australia, particularly as the delivery of new housing continues to be delayed due to shortages of materials and tradespeople.

Why now is a good time to invest

“Supply and demand is what’s going to drive any property market and if you’re looking at vacancy rates there is no way we won’t see price growth with the demand being so high in many locations,” Graham says.

“Australians have $260 billion worth of liquidity currently sitting in their mortgages. So, household balance sheets have never looked better. That means that we’ve got equity that can go into other investments – and people trust real estate.

“Realistically, with a 20% increase in the national median price last year, if you spent $500,000 on an investment property last year, you would’ve made $100,000.

“It is always a good time to buy real estate,” Graham says, “The question is where.”

Why regional markets are still a good investment.

Graham says vacancy rates are still very tight in regional markets which coupled with a lack of supply is driving price growth.

He says investors need to ensure they aren’t over-leveraging and pick assets they can hold for the long term.

“Realistically, if you can hold a good property for ten years, whether the market’s up down or downwards or sideways, at any period of time, over ten years you will make money.”

It’s still important, he says, to ensure the regional location has all the fundamentals for future price growth including low vacancy rates and future infrastructure spending.

“If you can pick that over the next 10 years, you will make money,” he says.

One of the most powerful tools an investor can use

Graham says too much emphasis is put on median house prices, which can be misleading, as by the time sales are finalised it can take months for results to come through and be reflected in the price data.

He says vacancy rates paint a much clearer picture of how the market is performing and can be one of the most powerful tools that an investor can use as markets with incredibly tight vacancy rates tend to experience price growth.

“We’re typically looking for anything under 3% (vacancy rate), that is what we would say is a good market,” Graham says.

“There are markets all over the country right now in most capital cities where it is under 1%. These are the numbers that investors should be paying attention to, not media reports and what’s happening with median prices.

Why use a buyer’s agent

“Obviously by using a buyer agent, you can save money,” Graham says.

He says good buyer’s agents know about many different locations across Australia as they are always researching and analysing markets.

“A buyer’s agent will open you up to various opportunities, not just in your local postcode, which is going to allow you to have diversification within your portfolio,” he says.

“Buyer’s agents will negotiate on your behalf. It is not always about price, it’s about the terms, it’s about understanding the laws within every state.

“If you’ve got a good buyer’s agent that works interstate, they will know how to use those laws to your advantage, and this can save you an enormous amount of time. It can also save you an enormous amount of money and it can give you opportunities to buy off market.”