Make Property Investment Work for You in 2015
So you finally won the lotto and are now wondering what to do with the heaps of cash you have stacked neatly in your garage. Or maybe you worked hard day in and day out, every year for the past many years, to finally have enough savings to think about making an investment in real estate. Full disclosure – where you got your money is none of our business. We are only here to tell you where to invest it.
When it comes to investments, there is no such thing as a safe bet. Don’t believe us? Ask anyone who in invested in the oil and gas sector a couple of months ago. Hell, you can buy gold in the night and wake up the next morning only to find yourself elbows deep in debt. And when it comes to property investment, the market is also tarred with the same brush . That being the case, getting in touch with the experts in the field can help you make an educated decision.
What’s Happening in The Property Market?
The previous few years have rather been uncertain in terms of the property market. However, now we can see some consensus building over the property market as experts have started agreeing on the future prospects.
The illustration above shows the interest rates situation of the property market in terms of home financing affordability, lending rates, etc. It offers quite a bit of insight into the history of housing markets and the various cycles the market went through throughout the period of relative economic stability. This indicates that, the government brought the interest rates down to cool the market prices, effectively creating the perfect opportunity to invest in property.
Mid 20th Century
The 1950s and 60s displayed renowned stability with housing capitalisation rates (Annual Net Operating Income/ Cost (or Value) of the Property ) remaining quite stable compared to the yields (Annual rental income – Annual expenses) / (Total property costs) x 100). This indicated a period of investments directed towards non housing investments in creating a perfect opportunity for financial planning.
As the modern financial system came to be, it kick-started the market with a period of boom that lasted for a decade. After speculatory practices become a part of the market, the market collapsed near the end of the 20th century. Hence, the 90s were the perfect time to invest in property as the recession and new opportunities for growth kicked in.
21st Century – Changing Trends
The 21st century started off with a massive boom paying off the investments made around the turn of the previous century. However, interest rates were increased and the unprecedented growth slowed down and gave room for some retracements.
The current conditions of the market suggest that now is the time to refinance your current loan or invest in property. The prices seem likely to rise in the next few years, and any investment made today is most likely to generate a healthy ROI a few months down the line.
Our forecast seems to be complemented by the following fiscal factors:
- Rising Prices
- Increasing Mortgage Interest Rates
- Flat Rents
Even if the prices rise by 10% in the coming year, mortgage rates in response should rise by no more than 0.75%. As the overall property rents remain flat, our index shifts up by not even halfway to the resistance or the sell zone. The stats effectively indicate a decent room for medium term growth, hence creating the perfect property investment opportunity.
The only way for the property market to not grow as expected is through credit controls in the housing market. Otherwise, the cycle should repeat itself as forecasted. As all state institutions, RBA will be late in its response to the market.
It’s important to remember that our forecast is simply an opinion formed on the basis of the available stats and market studies. In the past, the property investment market has followed particular patterns or cycles, and careful predictions can be made after careful study of the past and recent trends.
It is possible that prices remain stable or even decrease due to various factors that affect the market, so this article alone cannot be used as a basis for property investment. However, observing the history of the market, coupled along with the recent cyclical trend for the price behaviour, we are doubtful that the market movement will be any different from previous years.