Expert Advice with Kate Forbes
The past decade has certainly been tough for homebuyers.
The post-GFC property boom meant many hopeful homeowners all but gave up hope of buying their dream home in their desired area, but in the last year or two, a switch has been flipped.
Dwelling values are on the decline, lines of credit have tightened up, and it has become a buyer’s market.
You’re probably thinking now is a great time to grab a bargain, and add an investment property to your portfolio at under market value.
Well, this may be an unwelcome reality check, but – there is really no such thing as “under market value”. It’s a complete misnomer, in fact.
A property is worth what the market at the time says its worth – so when the market dips, so too does the value of the property.
Unless you’re making an offer on a home that was recently the scene of a terrible crime and no-one else in their right mind would buy it, you’re unlikely to be saving big bucks on the purchase price.
But, it is entirely possible to buy a property at what you consider to be a bargain price for the area, property type and size – if you employ the right negotiation tactics and do your research, and get the right professionals on your side.
For example, if you employ an experienced buyer’s agent, they’ll be able to tap into situations where motivated vendors are in a hurry to offload their property, thanks to their industry contacts.
If you’re in a position to negotiate on terms such as settlement periods and inclusions, these sellers could be prepared to meet you in the middle when it comes to price.
A good buyer's agent will also know how the local market is faring, and if it happens to be flooded with a particular type of property at the moment.
This oversupply will boost your bargaining power, and put you in a better position to dictate pricing and terms.
But that’s not all you need to consider.
At the moment, it seems like there is less competition out there for properties.
This has been the case, after foreign buyers were affected by regulatory changes, and APRA crackdowns and the Royal Commission have impacted the availability of credit for everyone else.
Recent positive developments, including APRAs relaxing of assessment rates, mean that there are more savvy buyers in the market with a keen eye for investment-grade properties, and these guys are ready to pounce.
They have their finance set up and their buyer’s agent waiting in the wings, so they can snap up the next top-notch property to add to their portfolio.
So while you might see fewer people out and about and open homes and auctions, those that still turn up could prove to be pretty stiff competition.
This means it’s even more important that you have your own ducks in a row, so you can act without delay.
All of this said… would it be great if you could score a fabulous property at bargain price? Of course!
But much more importantly, it would be life-changing if you could purchase a home that will outperform others in terms of capital growth, and hang onto it for as long as possible so you can reap these rewards.
That may not be the cheapest, most under-valued property you can find in the current market, but spending a little more now could see you enjoying the payoff in years to come.
Don’t try to “time the market” – it never works out the way you’d hoped.
Equally, don’t hinge your entire strategy on tax breaks or potential rental income, as these really don’t have the huge impact on your wealth that you might imagine.
Instead, buy a solid investment-grade property with good prospects for capital growth, and you’ll have a quality asset that will blossom over time – and set you up for financial freedom.
Kate Forbes is a National Director at Metropole Property Strategists. She has 15 years of investment experience in financial markets in two continents, is qualified in multiple disciplines and is also a chartered financial analyst (CFA).
She is a regular commentator for Michael Yardney’s Property Update
Read more Expert Advice from Kate here!
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.