The property market is down, so should you invest?
Auctioneer Damien Cooley gives the lowdown on what changes when the market is down – and what to look out for if you are a buyer.
The first thing you need to know about investing when the real estate market is down is that it won't be down forever.
Buying when the market is weaker presents good opportunities. By this I mean you will be competing against fewer people when you're looking for that investment property or home to live in.
When the real estate market is flying, buyers have a fear of missing out. Media report strong auction clearance rates and rising house prices which fuels buyer sentiment. We see more people competing for the same property which ultimately drives competition and prices.
So, what are the things to look out for when the market is down?
Don't miss an opportunity because you're worried that no one else wants it. I have seen plenty of buyers walk away from great properties at good value because they think no one else is interested or wonder why no one else is bidding at the auction.
In many circumstances, there are conditional buyers wanting to make offers subject to finance approval or with extended settlements, so being ready to act is my number one tip. Working with a quality mortgage broker that can get you a pre-approval at the best rates is imperative.
When looking at what to buy, the most important rule for long-term real estate investors is to buy quality. This often means you will pay a little more, but it's this quality that will reap you a better reward when it comes time to sell.
There are some things you can't change about a property. The suburb, the street, its aspect and parking.
As an investor, I look for the best attributes in a property and I'm critical when it doesn't tick all of my boxes. I also focus on capital cities and areas close to CBDs. I liken this to buying a blue-chip share on the ASX. If you are more risk-averse, get into property development. If you are a long-term holder looking for a low-risk investment, buy quality real estate in major capital cities.
So where to from here? What I am mindful of right now is that interest rates are incredibly low and are likely to remain low for quite some time.
APRA has just loosened the servicing rates applied to the banks and these drivers together mean that buyers are able to borrow more money. This, coupled with a low volume of property on the market in Sydney, is partly why we are seeing the market begin to turn around.
The good news is that there are more properties coming on the market and they are not that far away. Traditionally we see the bulk of spring listings hit the market in the months of September and October. More property means more choice for buyers and if I were a buyer I'd be waiting for spring to see what's on offer.
Damien Cooley is the director behind Cooley Auctions. His business conducts over 6,000 auctions every year. With an enviable record of sales success in both residential and commercial property, he is the go-to auctioneer for Sydney's leading agents. Damien is also the five-time winning auctioneer on Channel 9's The Block.
Disclaimer: The views and opinions expressed in this article (which may be subject to change without notice) are solely those of the author and do not necessarily reflect those of Finder and its employees. The information contained in this article is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort. Neither the author nor Finder have taken into account your personal circumstances. You should seek professional advice before making any further decisions based on this information.
Image credit: Getty Images