Is it a good time to buy an investment property?
"Is it a good time to by an investment property" is a question I am asked all the time. My reply is and will always remain the same. If you have researched and can afford your Investment Property (IP) and have a hold strategy there is never a bad time to buy, it's that simple.
But what about right now I hear you saying? What about the Global Financial Crisis, what about the interest rate rises, what about this affordability crisis?
There has never been a more ideal time in the last 30 years to purchase an IP period.
Let's start with rates. Despite the recent .25% rate rise we are at historically low rates. I recently spoke to my father about the rate rise and he laughed stating "your kidding, Hawke nearly crippled your mother and I at 17.5%, you should be laughing...not crying". It reminded me we are lucky, even if rates did climb another 1% to 2% over the next 12 months we still have lending options that make holding a property the cheapest it has been in 20 years!
Why would you wait to pay more money to hold your investment property? All experts are predicting rates to climb with leading analysts suggesting a rise if 1.25% to 1.5% over the next 12 months. Before long you could be telling your kids about the good old days and what "could have been". If you can account for a possible 2% rate rise in your budget now is certainly not the time for the "wait and see" approach...money isn't getting cheaper.
Your IP is also likely to reach unprecedented demand from renters as we are now in the midst of a worsening affordability and rental crisis. In most capital cities vacancy rates are hovering from the 1% to 2% mark with no let up in sight. The ANZ Bank's head of financial system analysis, Paul Braddick recently noted at the Melbourne Institute Public Economics Forum, "demand for housing was 180,000 dwellings annually, but only 150,000 were being built, and the situation would worsen, with a national shortage of 200,000 by 2010."
"We're just not building enough homes," he said. "Houses are like bananas. If there's a shortage, house prices are going to go up." Rents would also rise by 10% in most capital cities over the next few years he also claimed.
Are you going to miss the boom? We are hitting the penultimate crossroads for investors with lowest IP funding opportunities and the highest rental demand on record, possibly likely to never be repeated again. More and more leading property commentators are noting that the current mix of increasing population, interest rates, demand from overseas investment markets and increasing job security is creating a cocktail for another property boom. Here in Melbourne auction clearance rates are peaking at 90% up from mid 70% only six months ago. According to a recent BIS Shrapnel's report house prices will surge more than 20% over the next three years, with Sydney and Melbourne to receive the largest gains at 19% each, but which stands out?
Melbourne is being courted by local and international investors alike, offering some of the most affordable IP in the country. Melbourne is currently seeing a population intake of 1800 people per week and expected to be the largest capital city in Australia by 2028 according to the recent KPMG Population Report.
State Government spokesman Bill Kyriakopoulos said the Government was planning for at least 5 million people to be in Melbourne by 2030. ''We are planning for the future by developing an integrated transport system to accommodate growth, directing growth to key corridors, building up activity centres and providing timely and quality new infrastructure for communities,'' he said.
State Government has developed the Melbourne 2030 Plan, a plan to sustain this growth and maintain a viable, economical and sustainable city. This plan has earmarked selected locations as Growth Areas to receive significant population intakes and billions in dollars of infrastructure funding. With some of these locations offering IP from $260,000 and entitlement to the National Rental Affordability Scheme (NRAS) it's not hard to see why investors are flocking to the garden state. Is now the time to buy your IP...there has never been better!
Property Planet provides IP in Melbourne 2030 Growth Areas for as little as $260,000. Our quality off the plan of the plan homes come with a 10 Year Rental Guarantee and to First Time investors we have a Zero Cost Guarantee, where we cover your first 12 months hold costs post tax deductions. For more information please visit http://www.propertyplanet.com.au/ or call 1300 669 449.
