Uncertainty and volatility are part of the cyclical nature of all markets. While some property owners and investors may be experiencing difficult times at present, the medium and long-term outlook for residential property and rental incomes is excellent for most Australian capital cities, according to Malcolm Reid, property developer, licensed real estate agent, accredited mortgage broker and former economist for the RBA.
In the latest issue of Your Investment Property magazine, Reid explained that any disruption to the supply of houses and apartments will only escalate the growth in property prices and rents - to the benefit of those who have the foresight and fortitude to invest.
"My strategy for these turbulent times in the financial markets is not to adopt a new strategy but to pay even more attention to - and an even stricter adherence to - tried and tested property investment principles," he wrote.
Reid offered tips for homebuyers on how to ride the current financial turbulence:
1. Use your existing equity (usually incorporated in your home) to finance your deposit of 10-20% of the cost of your next investment.
2. Avoid fringe lenders - for the short term at least. It is they and not the major lending banks that tend to get into the worst trouble in the event that finance via securitisation becomes tight (or virtually unobtainable as in the early 1990s).
3. Buy properties that are in locations with the highest rental demand.
4. Consider units. In light of the predicted population growth, the pool of suitable unit renters will continue to grow for the foreseeable future (up to at least 2011-12) and they will be faced with an inadequate supply of units.
5. Buy properties that are and will remain attractive to renters, because they will also generally be attractive to other investors and even owner-occupiers in the event that you ever have to sell.
For the complete article and practical tips on how to manage your property investments, read the latest issue of Your Investment Property magazine, on sale now.
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