For those reading this, the question is: Do you think this is the best time to think about buying a property? The answer is YES!
For those who are forging ahead and buying real estate, the good news is that this year is much likely for this goal to lift them financially. We’re not just talking about the present, but rather into the future as well.
This perception is right this year, 2021. But it was also valid last year and the years before that. In 2016, 2012, 1998, then 1970…. year after year, in fact.
The truth in real estate is that….
Best and Worst Time to Buy Property? All the Time!
Most experienced investors will advise you that the basis for successful property investments is in timing the market. What does this mean? The most ideal time to invest is based hugely on a number of market conditions, aside from factors such as: supply and demand ratio, interest rates and market declines. Actually, decreasing property prices and unbelievably small interest rates make a good opportunity for buying property investors.
BEST Time? When you’re financially secure, with a ready deposit in your pocket is one thing. Truth be told, this year could be the opportunity of a lifetime for property purchase considering the possibility of robust house price growth and dwindling mortgage rates.
Conversely, it’s the WORST Time when you’ve either had a job loss or when your income is unstable in the present economic situation. It is really a potential risk to obligate oneself with a mortgage. The reality is that it will be tough for you to even acquire a loan.
It is worthy to know and understand the property market itself and its various dynamics before making any purchase. You should find the history of the location and the property through research. Often, there are property investment opportunities being offered, but to ensure you will be winning in your investments means that you have to buy in more beneficial market conditions.
Here are the Factors that Affect Growth Trajectory and Property Price Performance
- Current Economic Situation – The economic condition and accomplishments of the broader economy has an influence over the people’s ability to both sell and buy the property.
- Consumer Confidence – As people are more contented about their financial standing as well as probable job prospects in the future, they’re expected to go more for big purchases like having an investment property or perhaps, upgrading to a new home.
- Levels of Employment – Once the community has high unemployment levels – it could only mean that less people can manage to pay for a mortgage and this obviously cuts the demand for property.
- Government Program – Factors such as tax, depreciation, and homeownership grants will affect either the increased or reduced demand for property. This is especially true for recent years’ new properties; this is actually where the federal government’s main program has been.
- Population Growth – This accurately implies as the household formation – when there is an intensified movement of people into a particular area, this is generally equivalent to more housing demand, either to buy or rent.
- Local Demographics –Things under this category include average age, household structure, average salaries, employment opportunities and crime rates.
- Supply – The law of supply and demand, a basic principle of economy is a critical driver for price growth of property markets.
- Credit Availability – Heard of property investment as a finance game with some houses tossed at the centre, but even the owner-occupier demand is very much powered by the accessibility of finance and the cost of money involved, or simply put – interest rates?
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What are the Deciding Factors?
Before you conclude if conditions are correct to buy an investment property, take note of these factors when you are timing your purchase:
Property cycle
House prices pass through four phases as per experts. A property cycle is typically the recurrence of events in the property market as experienced by the property investor.
- The boom phase – Real Estate property prices escalate fast so this is seemingly the shortest phase in the whole cycle. This period begins leisurely as the investors realise that property prices and rental income are rising. Because of this – it has an effect on the heightened property market activities leading to oversupply and the next phase.
- The downturn phase -The boom phase is usually followed by a decline in the market due to its excess supply of properties. With this, what usually can happen is a rise in vacancy rates and a plunge in rental prices. During this time, the property prices cease to increase and even fall down intensely. This also persists actually for many years.
- The stabilisation phase – For this phase, several economic factors overtake to strengthen the market. Diminishing interest rates and controlled demand while on the decline phase set the circumstances for the succeeding market’s growth. Thus, this period is said to offer many financial opportunities but are certainly not acknowledged by the investors.
- The upturn phase – As the name suggests – property prices begin to improve, thus, realising more favourable investment options. Rents are escalating as vacancy rates gradually decrease. Property values are optimistic – they start increasing for the beachfront areas or inner suburbs then extend to mostly middle-ring and then eventually to the outer suburbs. Here’s more: several properties are generally affordable and the capital gains on property investments are mostly on the positive. These upbeat market situations draw the interest of many first-time home buyers and investors, signaling the resumption of the next cycle.
There is no particular cycle in Australia. But there are many distinct property market cycles around the country. This simply means that if one state or region is having a property setback, another location might be having a property boom. So, it is noteworthy to identify the market’s status within the property cycle to ensure that you are doing it the right way – purchasing the property at the right time.
Property values
Investing in property is typically focused in capital growth, so opting for a property that’s most probably to soar in value is one of the most vital decisions you will have. This causes buying at the right time and price quite critical.
A few investors buy their investment properties when property prices are on the ascending mode. This is partly credited to a growth in economic activity in the property’s area, and perhaps a rising population in a certain city or region.
But property is considered a long-term investment. Thus, it is not wise to establish your decision to purchase on property prices escalating.
The solution is to make your own research. What are the future infrastructure projects in the location which can heighten the demand in your property? What are the average costs of properties in the area that you’re investing? How much in depreciation claims will you be paid in case you buy a new or upcoming property? Having the answers to these questions will surely provide you a good gauge of the right time and price to buy your property.
Risks
The least profitable property investors are those that have not planned sufficiently for risks. Property investment just like any asset category includes some risks.
It is not the best time to buy a property within a location experiencing slow growth in rental payments and less migration levels. You may want to check other properties, or in case you actually perceive potential in the location you’ve chosen – you must hold on till the market situation becomes more encouraging for you.
Apart from many economic factors, what can put you in a very tight situation are the changes in your personal or financial conditions, to be specific about it. Before thinking of investing, you need to ensure that you are in a robust financial spot to even purchase a property. To compare it with other assets like mutual funds or stocks– you can’t just sell your property when you are in a financial grip.
Worst Things to Do in a Hot Market
If you’re seasoned and perceptive, you can earn a lot regardless what the market does. Investors though will always make more money by going against the cycle. The most terrible thing you can do is purchase a property while in a strong or summiting market. The thing is – you are so much behind.
Worst Things to Happen in a Falling Market
A falling market is not a cause for alarm so do not sell your property in a losing stance. Try to hold on and wait till the next cycle. Always sell in a flourishing market so results can be maximised.
The truth is, any time could be both best and worst times to buy a property personally.
It is certainly dependent on a number of factors, such as budget, goals, risk profile, and prevailing conditions whether the current year is a good time for acquisition.
What’s an Abnormal Market?
If you study a market’s performance against time, a trend is apparent. A double-digit year-after-year progress, while wonderful to encounter – is not deemed normal.
This specific manner of growth can often be charged to an event or progression of events which are not within the norm. For instance, at the start of a mining industry boom – as there are many ongoing constructions and people move in the area with the attraction of high-paying jobs, this is the place where the lion’s share of the growth will occur.
These higher-paying occupations will be the forerunner to rising rents since the market will allow the growth. However, because growth was dependent on the industry boom, market conditions may not be sustainable.
Conclusion
The choice of investing in real estate should be established by a mix of two or even more factors mentioned. For example, considering all finances are in order – it is best to do your due diligence prior to buying an investment property. Plus, be reminded never to fret too much about attempting to time the market. In case you obtain a good real estate deal, have the money, have accomplished your market research – then you do not have to wait for a buyer’s market to happen!
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