Investment property options in a market downturn

Article supplied by DHA Australia. 10/12/2015

The financial outlook in Australia has switched “from bleak to recessionary” in 2015, according to UBS Economist, George Tharenou.

The latest Australian Bureau of Statistics April-May 2015 survey backs up this sentiment by revealing that mining firms expect to cut investment by about 34 per cent, manufacturing firms by 24 per cent, and other firms by 6.1 per cent. Actual capital spending fell by 4.4 per cent in the first quarter of 2015.

The slowdown in economic activity has meant that the Reserve Bank of Australia slashed the cash rate in May 2015 to a new low of 2.0 per cent and has held it at that rate until December 2015. There are also predictions of rate cuts in the near future. According to Glenn Stevens, Governor of Monetary Policy Decision at the Reserve Bank of Australia, ‘The economy is likely to be operating with a degree of spare capacity for some time yet.’

This might seem like welcome news to property investors but it is a worrying sign that the economy is becoming weaker. Despite property prices continuing to rise strongly in Sydney and Melbourne, trends have been more varied in a number of other Australian cities. Sam Saggers, CEO of Positive Real Estate Group said, ‘Property investors need to have fiscal consideration and use planning and forecasting to anticipate the challenges ahead and plan how to endure a downturn.’

As a property investor your ability to ride such a downturn depends on how you manage the risk. You could hold your nerve and do as America’s most successful investor, Warren Buffet does and invest countercyclically. If you choose to do this—purchase property in an economic downturn—you will need to decide if you go it alone, or tap into the property investment offerings of a reputable company like Defence Housing Australia (DHA). Their property investment program offers fiscal peace of mind during an economic downturn. Investing with them will give you:

AAAAAAAAAAAAAAAAAAAAA • a guaranteed rental income1
AAAAAAAAAAAAAAAAAAAAA • a long-term lease of up to 12 years
AAAAAAAAAAAAAAAAAAAAA • an annual independent licensed market rent review
AAAAAAAAAAAAAAAAAAAAA • a professional team of property managers that ensure the
AAAAAAAAAAAAAAAAAAAAA   investment property is repaired and maintained throughout its lease, and
AAAAAAAAAAAAAAAAAAAAA • a restored property that’s ready to be privately leased or lived in at the
AAAAAAAAAAAAAAAAAAAAA   conclusion of the lease.

What’s reassuring about this investment is the guaranteed rent for the duration of the lease1. The rent is reviewed each year and won’t fall below the starting rent, and it’s accrued daily and paid monthly in advance. DHA will manage the tenancy of the property, carrying out inspections and reports at periodic intervals and issuing you a monthly statement that itemises rental payments, outgoings and any other expenses. DHA can also pay any property-related outgoings on your behalf (including rates and insurance premiums) as part of their complimentary bill-paying service. And because DHA is backed by the Australian Government, and their tenants are members of the Australian Defence Force, it offers you peace of mind that your property is in good hands.

As Lindy Lear, an award winning and qualified property investment advisor said, ‘Investing in areas where there is a military presence helps in finding good tenants—they always pay and are extremely neat and tidy!’ DHA’s Property Care service means that your investment property will be maintained to a high standard, in line with their contractual obligations with the Department of Defence. And because of this, you’ll have minimal out-of-pocket expenses and phone calls about property management, repairs and maintenance. Property investors have much to consider during a property downturn, including whether to invest and who to invest with. DHA ensures that an investment property’s cash-flow will continue, despite a predicted bleak economic outlook, all the while maintaining it to a high standard.

Enquire online to find out more about investing with DHA.

1. Rent may be subject to abatement in limited circumstances.

Investment is subject to DHA’s lease terms and conditions. Investors retain some responsibilities and risks, including property market fluctuations. The advice contained in this article is for general information only and prospective investors should seek independent advice.

Disclaimer: While due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.

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