Capitalise On 2019-21 Property Investment Opportunities By Acting Now
The current property landscape demands revised strategies, says buyers agent Santosh Nune. Buy and hold portfolios under the spotlight as alternative opportunities emerge throughout 2019-21.
Groundbreaking technologies, world economies under pressure and a changing property landscape means a move away from buy and hold strategies to leverage new investment opportunities from 2019-21. A decade on from the Global Financial Crisis, Wall Street’s recent significant losses will call a halt to Australia’s property market growth and end our days of easy finance. Over the next couple of years, interest rates are tipped to rise and a raft of investors face loans moving from interest only to principal and interest. Sitting on top of everything is the breakdown of traditional employment models with online platforms including AirTasker and ServiceSeeking on the rise. This puts more individuals in charge of their own working environments, leaving travel time a thing of the past. The trickle-down effect sees a larger emphasis on where we want rather than need to live, potentially impacting traditionally in-demand investment areas and affecting a portfolio’s bottom-line.
Act now to prepare for new opportunities
As a constant observer of world and local economies, I’m always assessing what’s coming next to see how it could affect both my clients’ and my own portfolios. Guided by my property investment experience over the past two decades, I’ve rebuilt my portfolio to prepare for coming opportunities. The approach has been twofold: to sell properties that have reached their peak and any under-performers. Some of these properties were originally bought using a traditional buy and hold strategy, however with today’s climate in mind they no longer suit the market’s movements. I advised my clients accordingly and have for example, moved many out of Brisbane units over the past couple of years and into growth markets elsewhere in the city, along with Melbourne and Sydney. Additionally, I’ve taken a worst-case approach to my portfolio and moved 75% of my loans to principal and interest to ensure I can sustain repayments if interest rates rise. I’m now ready - as are my clients - to capitalise on the opportunities presented by a more challenging market for investors (please note that avoiding capital gains tax shouldn’t be a reason to hold on to unsuitable properties - paying tax is a good thing, as it means you’re making money!).
Cash is King - how will you survive P+I?
Anyone still sitting on the fence about their portfolio needs to look at their overall finance structure. Many new investors post-2012 will now be coming out of their honeymoon periods, facing major increases in repayments as their loans move to principal and interest. With repayments set to double in some cases, where will investors find that extra money? Wage growth has been sluggish - if at all - with no increases on the horizon. It’s a tenuous position to be in and needs to be addressed ahead of time. Leaving it until the last minute will put you in an even more vulnerable situation, having to accept what’s on the table at the time, rather than being able to fully assess funding opportunities from a variety of lenders. Often overlooked is the cashflow effect from taking 30-year loans with five years interest only: you’ve then got 25 years’ worth of higher repayments to pay down principal. Applied to a large portfolio, the sudden impact of moving a number of properties to principal and interest could be devastating. Keep something in reserve so you’re able to meet financial obligations, hold star performers and be ready for opportunity.
Where next for investors: reading the market
As capital city housing prices flatten across the board, it’s only seasoned investors who’ll know where to find sub-markets primed for growth within these areas. Anyone entering the market post-2010 will lack the skills required to leverage a property portfolio in a downturn, as they will have only seen a market on the rise. The expertise you’ll need during this time won’t be found in a book or online. These resources may provide you with foundation knowledge but won’t offer the dynamic relationship offered by someone looking at your own personal circumstance. What’s more, you cannot see your own potential like a mentor can - by acting alone you could sell yourself short. Whether you’re an existing investor or new to property, what you do in 2018 will form the backdrop of your portfolio for the next decade. You need to be primed financially to take advantage of properties that may come on to the market where others have been forced to selldown. Of particular note will be dwellings of owner-occupier quality, which can always command higher prices on the market due to their unique composition. Investment grade properties, however, are a dime a dozen as they’re far easier to come by. Keep this in mind as a strong part of your purchasing strategy when adding to your portfolio.
With the barriers to entry so low, anyone can access the property market but once outside economic influences hit, trouble strikes. Sustainable, long-term portfolios are run like a business - selling properties past their peak and opening up cash flow for other markets on the rise. Act now in order to leverage change coming down the line - opportunities will be out there for those prepared to make a change.
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