After any period of strong property growth, the next question is usually: are we going to see a downturn? Potential new buyers are wary to buy at the top of the curve, that’s understandable. But mainly if you are an investor planning to flick a property after a quick reno. If you are a buying for the long-term, buying well anywhere along the trend line is not a problem.
Currently there are pundits saying we are looking at a downturn while others are saying this demand will continue. Interestingly, the NSW state government is one that is confident. They have a bullish forecast for stamp duty earnings for next financial year, which means they don’t expect the housing market to crash any time soon. Last year the transfer duty was $9.63 billion which was the largest ever recorded.
Unsurprisingly, there are many in the real estate industry predicting extended growth. John McGrath, for example, has said renewed first home owner grants will boost prices in NSW (see next BPS article). Also Mark Bouris, property and business guru and chair of financial planning group Yellow Brick Road says don’t wait around for property prices to drop. Especially those homebuyers who are, “waiting for prices to drop because of some sort of government intervention, they’re kidding themselves. Forget it! The government won’t intervene in markets like that. They just won’t do it. We’re not in China. It’s just not going to happen,” Bouris says.
The issue over recent years, he says, has been an affordability shift, rather than a crisis, because some locations that used to be affordable are no longer that way. He goes on to say that the affordability argument is nothing new; “In 2001 or 2002, John Howard launched his election campaign on affordability. Affordability has been an issue for a long time.” His advice to prospective property owners is to look outside their suburbs and invest in other locations.
But they don’t have to physically move into their investment property, he says. “You live and rent where the jobs are and you buy where you can afford but also where it has some fundamentals,” he says. “It shouldn’t just be because you can afford it, there’s also fundamentals such as if there’s infrastructure there, a hospital, a university, jobs and there’s population growth in that area.” Homebuyers and investors may have more access to research and data these days but Bouris says they are also operating in a more complex environment that requires professional guidance.
“The best piece of advice that I can give someone today, which didn’t exist years ago, is that borrowing money is complex today compared to what it was two years ago or even a year ago. It’s quite complicated,” he says. “Make sure you’ve got someone who can direct you because it’s very complex out there. It’s not as easy as it was. It’s much harder.”
Bouris has been a long-time proponent of regional locations with solid fundamentals that can provide investment opportunities as well as cash flow potential. That way, he says, a new investor can afford to hold their property until it has achieved upside growth and they decide to either sell down or borrow against it to build a portfolio. By doing that, he says, then maybe one day they can afford to buy their dream home.”
Advice from these industry professionals needs to be taken with a grain of salt. They are obviously pushing their own barrow. But here in our shire, I do not see immediate signs of a downturn. The demand remains high here and prices will only come off we see a surge in new listings which I also do not see in the immediate future.
Some quotes via Property Observer Online