The first half of 2016 has moved quickly and we are only two months away from the end of financial year (EOFY) so it is a good time to stop and assess how the year to date has been treating property investors.
In general the negative market sentiment that has been floating around for the past 18 months or so is starting to lift and investors are generally feeling more comfortable with where the market is at. Whilst a number of investors are still being cautious and taking a ‘watch and wait’ approach the more savvy investors are taking the opportunity to capitalise on current market advantages.
Interest rates have remained low and the cash rate has remained unchanged by the RBA at historically low levels of 2.0% for the past twelve months. Low interest rates have provided many first time investors with the opportunity to get their foot in the door whilst others have used equity in their existing portfolio, combined with low interest rates, as an opportunity to reinvest. For others, the low rates have provided an opportune time to get ahead and build a savings ‘buffer’.
There is evidence to show lenders are being firm with finance approvals, but often this a result of borrowers over-estimating the value of their current home or assets. We have seen examples of investors applying for finance based on property appraisals carried out prior to recent market corrections. If you are applying for finance, it is important you have a keen understanding of the current value of your home or assets to avoid disappointment. Lenders are being strict but this is for a good reason – you do not want to find yourself borrowing too much and getting in over your head.
The other trend we are witnessing is a surge of investors who have the confidence to invest in the current market but are uncertain how or where to start. As a result, Investor Assist is hosting its largest property event on the 3rd of May – Investment Insiders – at the State Theatre Centre to share tips and insights from four of Perth’s foremost property experts on how to find opportunities in the current market. You can book your spot here.
The timing of the event also coincides nicely with the EOFY which is just two months away. Now is the time for all investors to evaluate their investment objectives, together with their current properties or portfolio, to see if they are on track for the rest of 2016. There are many proactive actions investors can be taking to improve the value and performance of their properties. Plus there are associated tax advantages so make the most of the new financial year ahead and speak to your accountant, financial advisor and/or property manager well before 30 June arrives.
It is also important not to be deterred by the federal election which is likely to be called for the 2 July 2016. Elections are renowned for causing a temporary ‘holding pattern’ while everyone sits and waits on the outcome. Delays are unnecessary and have the potential to set back your own journey to wealth creation. This is another good reason why you should attend our Investment Insiders event on the 3rd of May.
Looking at the next six months and beyond the federal election, there is plenty to be positive about when it comes to the Perth property market. The outlook is for reduced growth but it is still stronger than in the late 1990’s. Population growth has slowed since the peak of the mining boom but we are still forecast to reach about 4.9 million people by 2042 and 6.6 million in 2061.
The median age of the population of Western Australia is projected to increase from 36 years (at 30 June 2012) to between 40.1 years and 43.5 years in 2061 and regardless of age, the Perth population will always enjoy a coastal lifestyle so properties up to 20 minutes from the coast will always be in demand.
Some research I was reading this week made some interesting predictions that the greatest growth and demand for housing will occur in the ‘middle’ suburbs located between 5 to 25kms from the CBD with decent growth in inner suburbia and outer suburbs. This research confirms our forecasts and the reasons why we have been offering investment opportunities in these ‘middle suburbs’ for quite some time. Perth doesn’t offer the hipster lifestyle of Sydney and Melbourne but each of our suburbs does have a different demographic profile and it is important for investors to understand exactly where they are investing and what local market they will be targeting if they purchase an investment property in a particular location. This is something our Property Investment Specialists can assist with.
Looking interstate, whilst the Perth market was slowing the boom which had continued in Sydney and Melbourne looks like it has finally come off the boil. Prices have risen dramatically in Sydney and Melbourne over the past two years, pricing many investors and home buyers out of the market. This is good news for the Perth property market as many interstate and overseas buyers will start to look west for less volatile investment opportunities.
Finally, there are many reasons why we all should be positive about the remainder of 2016 and for the future outlook for Perth. Our city is showing signs of recovery after the end of the mining boom and WA has a vast resource base so the city will always prosper. There are many other industries to focus on including health and education so we do not need to continually focus on mining and resources like it is the only thing our state can rely on.
Perth’s population is forecast to grow steadily and WA is located in a position of strategic importance. But most importantly – there are opportunities to be found in any market. You just need to have the confidence, mindset and right professional support to go out and find them.