2019 has been quite the year for property investors, characterised for many by ongoing uncertainty.
Starting the year in the grips of a major downturn, the outlook wasn’t good for landlords looking to capitalise on their investment properties. With prices and property values on a downward trajectory early on, it was a case of hold, wait and see for most investors.
Adding to this sense of uncertainty, the property market was impacted by a number of other forces during the year. The findings of the banking royal commission, Labor’s proposed changes to negative gearing in the lead up to the federal election and global economic volatility all presented challenges to landlords and property investors.
However, the second half of 2019 delivered a glimmer of hope through lower interest rates, improved auction clearance rates and a halt to the fall in property prices, particularly in the major capital cities. With growing evidence that the market is beginning to stabilise, there are new opportunities out there for landlords and investors.
As we prepare to bid goodbye to 2019. let’s look back at the main challenges and opportunities that faced landlords and property investors during the year.
2019 Challenges for Property Investors
The property market has been prey to uncertainty for much of 2019, playing havoc with investors. A number of factors fuelled this uncertainty throughout the year.
- The year began with the market holding its collective breath for the findings of the Hayne Royal Commission into the banking, superannuation and financial services industry.
- The lead up to the May Federal election was another period of uncertainty with the Labor opposition campaigning to limit negative gearing and reduce CGT concessions if elected.
- Economic uncertainty has continued throughout the year with weakening employment, slowing growth and a poor global outlook dampening investor confidence.
In the shadow of the property downturn, it’s become harder for investors to finance additions to their property portfolio. Tightening lending conditions by APRA and the banks have made it difficult for investors to access credit during 2019, although some of these conditions are now being loosened. Many investors have also been challenged by the end of interest-only loan terms, with many loans reverting to principal and interest during the year. Increases in repayments have impacted cash flow for some investors, a trend that is set to continue in 2020.
Falling property values also challenged property investors in 2019. While the rate of decline slowed during 2019, it still was not the time for investors to add to their portfolio or offload underperforming assets. Most investors have taken a wait and see approach throughout the year, deciding to hold their assets and not risk selling at a loss in a low market. For those who’d planned to review their portfolio during 2019, this has resulted in a change of plan and strategy, challenging investors to find creative ways to ride out the downturn and balance their investments.
2019 Opportunities for Property Investors
Three successive interest rate cuts during 2019 have reduced the cash rate to 0.75%, the lowest rate on record. These cuts, while not a sign of confidence in the economy, still present a number of opportunities for investors. First, lower interest rates gives investors the chance to build more equity in their property by maintaining current repayments. Second, lower interest rates also improve cash flow, with lower mortgage repayments freeing up funds for landlords to undertake repairs, upgrade amenities or enjoy some much-needed financial breathing space.
The most recent property stats indicate that the market may be nearing the bottom of the cycle and about to enter a period of stabilisation. Values are no longer falling, auction clearance rates are holding firm, properties are selling more quickly and Sydney and Melbourne are recording some positive numbers after a couple of years of freefall. While prices are still low, stability in the market gives landlords a chance to take stock of their investments, look around the market and position themselves to make the most of future opportunities.
With prices low and the market nearing the bottom of the property cycle, the end of 2019 presents an opportunity for investors to buy property before the market adjusts and begins to rise again. While much of 2019 has been challenging for many landlords, low prices together with more favourable lending conditions mean now is the time for astute investors to get ahead of the curve and make the most of a stabilising market. It makes sense to take advantage of low property prices now so you can reap the rewards of future growth into 2020 and beyond..
Are you ready to take on 2020 and make the most of the challenges and opportunities ahead for property investors? Vision Property & Finance is here to help you make the most of your investment and maximise your return. For more information, call 02 8354 3000 to contact our Sydney office or 02 4014 1999 to talk to someone in our Newcastle office. You can also contact us here.