The Australian property market has been going through changes over the last year as it enters the next phase of the property cycle. There have been many factors which have all equated to the market downturn, none less the Australian Prudential Regulation Authority’s macro-prudential measures restricting lending to investors, the banking royal commission tightening credit as well as the impending NSW state and federal elections.
Investors face challenges this year whether they are looking to invest in residential property or shares. One thing to make clear is that the housing market is going through an orderly decline with little sign of serious distress. But when investing in property you need to act strategically and think long-term.
The outlook for the next year
Property markets around the country have been experiencing strong capital growth over the last few years, this hit a phase of unsustainable strong growth and as a result, we are headed towards a downturn period of flat growth and falling prices especially in major cities like Melbourne and Sydney.
Unlike previous property market downturns, the fundamentals are in place for a soft landing. With a strong economy, population growth as well as job growth, it is unlikely we will see any major crash. Therefore, with a long-term strategic approach and choosing the correct asset selection, property investment will still produce a positive return even if capital growth will be slower over the next year.
Property Investors are still confident and see the advantage in this downturn, therefore it is expected that many will still stay active in the market, but rather than aiming for major cities and immediate equity boost, many will be looking for a property that has potential to add value.
Regions and Suburbs to look out for
When forecasting property growth, suburbs closer to the city have the best capital growth potentials. There a number of suburbs and regions on the rise which are the new housing hotspots to watch out for in 2019.
When looking at growth areas, these will be predominantly based around employment hubs with committed new infrastructure and supported by new lifestyle amenities.
There will always be opportunities in the property market for wise investors, it is just that now you need to purchase with a long-term plan put in place and tailoring your strategy to meet changing conditions.
Buyers have now got the negotiating power. With less demand and more supply, this inevitably pushes more power back to the buyer, allowing them to negotiate terms and take longer making purchase decisions when selecting the right investment home for their budget, lifestyle and future return.
Settling on an off-the-plan unit in 2019?
If you are settling on an off-the-plan investment property in 2019 you need to consider the market value conditions, leasing options, and new lending criteria as banks become more prudent and strict on their criteria.
With current market value decreasing, valuations may drop 5-10% compared to the original contract price. If you receive a low valuation, investors should contest and consider getting a second opinion through a different lender.
Choosing the right leasing agent will also be a key priority for any investors this year. Consider finding someone that will give your listing the focus and attention it deserves so that it can be leased from day one. Getting 2-3 leasing agents to provide you with a leasing management offer would be a good way to consider the right choice for your needs.
Finding the right bank should also be a priority. A mortgage broker you trust can help you navigate through a minefield of options out there. As the Royal Commission has finally ended and changes to banking policies are now underway, hopefully we’ll see banks ease up on lending in early 2020.
If you would like to learn more about Sierra PropertyCom services, get in touch today.