Property Market

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You Are Never Too Young To Invest In Property

Most young people starting out make sacrifices to become independent. They may work low-paying casual jobs to pay for university or complete an apprenticeship to get qualifications. If they leave home to access these opportunities, they usually forego new clothes and entertainment, and even eat poorly to pay rent and transport costs.

Enjoy Success but Temper it with Discipline

When they earn their first substantial salary, the temptation to make up for what they missed is great. They often spend wildly on parties, holidays, latest fashions, a new car or other symbols of their hard-earned status. While they have earned the right to enjoy these rewards, a little discipline could improve their long-term situation.

They would enjoy more financial security in the long term by having a chat with one of our investment experts at Fountain Property Group. The best results in wealth creation through property investment are achieved by starting as early as possible, and there are a couple of reasons for this.

Long-term Projections for Property are Still Solid

One is the long-term performance of the Australian property market. Over the past fifty years, property has doubled in value every ten years, apart from a couple of minor hiccups. Despite predictions that our property bubble is about to burst, this has not happened and some expert opinions suggest it is still unlikely.

If current trends continue, the most likely scenario is that over the next twenty years, property will increase in value. These increases may not be as high as the average long-term figure of seven percent a year, but should at least reach four percent. This is still a very healthy return for the person who has invested in the right type of property, and we can help with that.

Investors Need Good Advice When the Market Turns

There will always be market corrections as investors respond to whatever is going on in the world economy. It is during these corrections that investors “going it alone” without good advice lose out. The right kind of property in the right location is the key to riding out these market corrections.

Take Advantage of Negative Gearing While It’s Still Available

This brings us to the second reason for getting into property investment early in life. The right kind of property will consistently earn rental income. However, it may not cover all expenses, especially early in the term of a mortgage. Current negative gearing laws allow these losses to be used to reduce tax payable. These laws may not be around forever, so we believe the time to take advantage of them is now.

Why work hard in your early years to get a good job or enter a lucrative profession, then fritter it away with years of ill-disciplined spending? We can help you get the lifestyle you want in retirement by investing in property now.

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Getting Into Property – An Alternative Approach

There has been much media comment lately about the Australian property market, much of it focused on the high prices being paid, especially in Sydney and Melbourne. This media conversation is bemoaning the likelihood that young Australians will never own their own homes like their parents did, and that they are being priced out of the market by investors.

Property Opportunities Available Outside Sydney and Melbourne

Like all such conversations it has some merit, but it is also ignoring the huge diversity of property available in Australia. It also concentrates its argument in two relatively small geographical locations, albeit those containing a significant proportion of our total population. In our other capital cities and large regional centres, properties are being snapped up by first home buyers and investors at reasonable prices.

How do we know this? We are the Fountain Property Group, a one stop solution for people interested in building an investment portfolio. Over the years we have been in business, we have heard many reasons why people think they can’t buy a home. With the right advice, these reasons can all be overcome.

Stable Income and Savings History a Good Start

The first issue is, naturally enough, having a sufficient and stable income that would give a lending institution the confidence to approve a home loan. The next factor is having a reasonable deposit firstly to avoid paying mortgage insurance, and also to demonstrate your ability to maintain a regular savings pattern over time.

Could Tenants in Common be the Answer?

Both these considerations apply equally to an owner-occupier, or to someone interested in purchasing an investment property. Another way to mitigate the risk, should something unexpected happen, is to purchase property with two or more other stakeholders under a legal structure called tenants in common.

If each party contributes an equal amount they become tenants in common in equal shares. If one or more parties contribute a larger or smaller share, they become tenants in common with shares in proportion to their contribution. There are some other issues that need to be discussed, but this is a viable way for people to purchase a home, particularly an investment property.

Good Properties at Affordable Prices in Regional Centres

The other factor that many people do not consider is the location where they want to buy. If it is for a home to live in, obviously that must be near employment. If, however, they are starting a property portfolio, there are many locations throughout the country, other than the capital cities, where they can get started. Wherever there is a demand by tenants for housing, there is opportunity for investors.

This, and other advice such as ownership structures, cash flow and management, is available to our clients at the Fountain Property Group. Anyone with a reasonable debt history and regular income can own property.

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Australia’s Love – Hate Relationship with Property

Australia is fortunate enough to have abundant data on the finance and real estate markets, and as pointed out by Philip Soos, a researcher for the School of Humanities and Social Sciences at Deakin University, Australian property values have been surging for the past couple of years.  We take a look at how the nation has developed a love – hate relationship with property for the past 150 years, and where we stand in the property cycle.

Property and Inflation. If both are moving at an almost even pace, that would mean that people are not favouring property over goods and services, and vice versa. Except for 1961 – 64, every rise in real prices have led to a downturn, keeping properties in line with the rise and fall of inflation.

Property and Rent. The cost of renting and buying property have closely matched, as drastic upswings in the ratio of property and rent have suggested the presence of a property bubble – from the 70’s, early and late 80’s and recently.

Property and GPD. The Great Depression was caused by a deflating property bubble, specifically in the commercial property market.  As mentioned earlier, every rise has always caused an economic downturn, causing recessions almost every decade.  The availability of credit has been one of the major drivers of the boom and bust cycle. When debt peaked 1893, it created a commercial land bubble and became one of the worst depressions in the history of the nation.

While property booms have been a part of Australia’s economy, it has always been evened out by property values and private debt.

Property and Debt. Data on Private debt goes as far back as 1861, while Land Value data started in 1910. Each of the peaks in debt – in 1893 and 1920’s have caused property bubbles to burst, and it was only during the 1970’s that the debt cycle was able to recover and recorded the highest peak on record in 2008, becoming the largest land boom on record.

Conclusion

The Australian property market has been driven by major economic factors, particularly inflation and debt that allows it to go through its cycle and recover. As of this writing, property values and interest rates have reached record levels that the nation has never seen before.  One thing’s for sure – If a boom or bubble happens, it will be the biggest in history. So goes on Australia’s love – hate relationship with property.

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Auctions Expected to Bounce Back in Late October

Weekend auction clearance rates finished at 68.7% for all capital cities, down from the same time last year at 72.5% but up from last week’s 66.9%. Forecasts show that the property market is set to bounce back as auction volumes are expected to rise late in October.

Sydney still leads all capital cities with a 75.8% increase despite dropping from last week’s 76.4%, followed by Melbourne, finishing at 67.2% from over 1,000 auctions in the area. Brisbane continues to rise steadily as it recorded a clearance rate of 54.2% from 47.4% last week.

Read more about this on the Property Observer website.

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Falling Dollar To Benefit The Property Market

The Australian dollar fell to a six month low at US89.32 – the lowest since March, as the US dollar surged against all G10 currencies. Iron ore prices also attributed to the local currency dropped, as it fell to a five year low.

Despite the drop, economists remain optimistic, with CommSec Chief Economist Craig James stating that the AU dollar is leveling to commodity prices. Job vacancies are also on the rise and is expected to pick up as it recovers from the mining boom slowdown. Surprisingly, the property market is set to benefit from the currency drop, as prices are set to rise with the interest rate expected to remain on hold for at least another year. Forecasts from SQM Research show that if the AU dollar were to drop below US85¢, Sydney prices could increase around 8% – 12% and 5% – 9% for Brisbane and Melbourne over the next year.

Read more about this on the Sydney Morning Herald website.

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Understand The Property Market Cycle

Economists have expressed fear in rising house prices over Australia with the current low interest rates, high unemployment and inflation reports. Michael Matusik describes this as an overheated market that will eventually recover in 2015. He states that this cyclical behavior must be understood to avoid any negative impact to the economy.

As of this time, property prices are indeed high, but this is not true for all states and territories. The prices are above normal levels, but not out of reach. In fact, arrears in Australia are relatively low.

He points out that gains this year and in 2015 will all be for naught if prices shoot up too fast. The current price forecasts an increase of 15% – 20% for this year. The high unemployment and inflation, interest rates need to fall further to promote lower home values. Lenders are also encouraged to promote strict lending measures so as not to overheat the property market further.

Read more about this on the Property Observer website.

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