Property investing: less risky now than during the boom

While many investors would recoil at the thought of ploughing money into an uncertain market, a leading property expert advised that the current difficult period was a rare opportunity to grow wealth.

John Edwards, chairman of Residex, said that while many would see this period as a time of high risk, for those investing in housing this perception was incorrect.

"Yes, it is for most assets, but housing is not naturally liquid and hence if there are price adjustments to come, they will not occur overnight and they will not be large - certainly not as large as we have already seen in the stock markets," he said. "In fact, investing in housing now presents a lower risk equation than it did during the period of high growth."

Edwards cited the abundance of bargains in the marketplace. "Even if house prices do fall, your bargain is unlikely to," he said.

He noted that rentals were rising and at the same time interest rates were decreasing. So in the not-too-distant future your investment could be a net generator of cash, not a net user.

"We need to identify areas where rentals are already relatively high, future growth is predicted to be good and find the bargain in that area," Edwards said.

"Remember that we have entered a low-risk and high-rental-return period for housing and using our cash now will ensure that we have assets to support us and allow us to make even more money. If we take advantage of the bargains that are now available, we will generate growth even as others see their [assets] dwindle away."

Edwards added that the decisive action taken by the federal government to inject $10.4bn into the economy, coupled with the larger-than-expected rate cut by the Reserve Bank of Australia would go a long way in preventing a massive slide in property prices.

"I've already seen an increased energy in the property market following the government's decision to increase the first homebuyer grant to $14,000 for existing homes and $21,000 for those purchasing a newly constructed home," Edwards said.

"The Reserve Bank's recent moves in decreasing interest rates had an immediate impact, and our property markets over the last three months have been correcting more slowly. In fact, from our data, we can see a turn away from the downward trend."