Buy property or bide your time?

It has been predicted that in some areas rental properties will soar by 20 per cent this year. So whether you are a first homebuyer looking for a long-term investment or you are looking for possible investment properties, it may be the perfect time to enter the property market. 

The First Time Buyer

For the first homebuyer it has long been a difficult feat buying into the property market. However it need not be seen as dismal. On 13 March, Adelaide Bank launched the Equity Finance Mortgage. This may allow homebuyers to avoid interest on 10 to 20 percent of their home loan. In return buyers may surrender 40 percent of any capital gains made when exiting the loan or on selling the property. This is the first interest-free type loan to enter the Australian housing market, however the government is now looking into similar ventures to ease the burden on first time buyers.

The Investor

For buyers seeking an investment property there are a few simple rules that must be remembered when choosing your investment. The important rule for the investor is to think long term. Prices follow a bust boom pattern and will go down. As long as you think long term, the average property increases in value every year on an average 10 year time frame. It has been suggested that buyers seek a property that will average an eight percent per annum return.  This will ensure that rental income on the property will cover interest payments and miscellaneous costs on the property.

Value Factors

Properties that may offer a higher return include those adjacent to trendy or popular areas and also remote areas. When seeking your property it is advised to research into the area and search for a “catalyst” that may push your property into the higher returns bracket. Catalysts can cover any urban renewal plans to be built in the area, road improvements or any other significant investments in the area.

Another common mistake to be made in the investment property market is not investing in scarce properties. Think about the demographic mix of an area and invest in those that have a high-expected population growth.  The areas often most likely to enjoy high population growth and in turn have a higher return on capital are coastal areas that are close to major cities. Areas that have previously been untapped and are now experiencing an influx of residents are Soldiers Point in Byron Bay and Sapphire Beach.  Each year 150,000 Australians seek a “sea change” in search of potential real estate. These wealthy buyers are now helping to inflate housing prices to increasingly higher levels.