Regardless of which city or suburb you’re considering investing in, it’s hard to miss the over-riding current sentiment that Australian property has peaked.
‘Sydney price boom over’, the headlines declare, followed by fearful warnings of a ‘looming property oversupply’. In other words: the property boom has run its course, the markets have peaked, and the dream is over. It’s enough to make a would-be landlord reconsider whether to invest in real estate at all…
These headlines miss the crucial points that property is fundamentally cyclical, and that locations can easily be in different point in the cycle. For example, there is an oversupply of units in Melbourne, so the market is about to enter a “correction phase” whereas in Sydney the unit market is still in the “ascending phase”.
The key is to pick your properties in the right market. If you can’t quite pick the ideal moment to buy in a given market, then don’t worry too much, the greatest gains are made by those who are in it for the long haul.
Also, keep in mind that, even though the Sydney market has still a strong undersupply dynamic, which will underpin price growth in the near future, the yields on offer for investors are very low, leading to challenging cashflows for Sydney landlords. So your “pick” of properties need to take into account the position of the market in the cycle in a given location, but also the resulting cash flow to ensure you can build and sustain a property portfolio for the long term.
But, coming back to my initial point: with all of these challenges and potential risks in the market, is it too late to invest right now to draw a profit?
The answer to this question will vary depending on your situation, but in my view, the concept of being ‘too late to invest’ needs to be reviewed in the context of your wider goals.
Is it your desire to invest aggressively in the short-term to generate a huge capital gain, as many have successfully achieved in Sydney in recent years?
If so, then you may have missed the boat for now. While Sydney has the fundamentals in place to continue on an upward price trajectory, it’s unlikely to experience the same double-digit growth in the next few years as it has over the last 18-24 months.
However if your aim to build a quality, sustainable portfolio of properties in strategic locations, with a varied and diverse mix of investment types then it’s never going to be ‘too late to invest’. I guess you need to create your own luck by investing wisely is promising areas and enjoy cyclical upturns to generate capital growth for you.
Right now, there are still many areas showing great potential and strong cash flows, such as the housing markets in selected Brisbane and Melbourne suburbs, or some of the regions benefitting from the Sydney ‘ripple effect’. Our clients are currently investing actively and successfully in these areas and our research team is continually uncovering new opportunities.
To invest successfully, you don’t need to ride the boom or chase the latest ‘hotspot’. What you do need to do is to pick the right locations and as always, you need to do your homework – because with the right due diligence behind them, astute investors are able create property wealth in any market.
For further information contact Multifocus Properties & Finance. Ph: 1300 266 350 / www.multifocus.com.au
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.