Property markets move in cycles with the local economy. You may have read about the recent slowdown of the Sydney and Melbourne property markets and might be wondering whether it is a good time to buy property.
A market slowdown usually means that property values are dropping, however what you may not know, is that these statistics apply to the median house price of the entire regional area. In property, there are markets within markets. This means that not all suburbs will behave the same way within a regional area.
Property can be purchased at any time of the property cycle. What goes down must come up, so the values will recover and the market will be buoyant once again. A long-term investment will ride the waves of any change in the economic climate.
Some property investors will buy and sell property according to property cycles, however the most successful investors, know how to spot an opportunity at any time. You don’t have to wait for the market to change, before buying your first investment property.
Here is how to buy property in any economic climate.
Do your Market Research
Always do your due diligence. This is particularly the case when markets are slowing down. You do not want purchase property which has the potential to lose a further to 15% of its value, otherwise your investment will not be financially viable.
If you want to buy property in any economic climate, look for property which has not been negatively affected by market cycles, either with a major increase in value in the past upswing or a major decrease in value in the most recent downturn. This occurs most in places of high demand such as city centres and waterfront property.
Focus on Affordability
Affordable properties tend to have the least amount of value fluctuation, due to the nature of demand. More people want affordable property, so the majority of real estate transactions occur around the median sale price.
When property becomes unaffordable in a certain suburb, investors will go in search of the next most affordable suburbs. Research fringe suburbs that have affordable property slightly under the median value, because here lies the opportunities for capital growth.
Diversification
When property values seem to be dropping on a wider scale within one particular market, it is time to look to other markets. Just because Sydney and Melbourne are on a downward trend, does not mean that Perth or Brisbane are doing the same thing.
Australian states and regional areas have different economic strengths, which create alternative property cycles. Buying property in a different state will introduce diversification into your portfolio and decrease risk, regardless of whether it is your first property investment or your tenth property.
There are many factors that determine whether a property is a good investment, not just where it lies within a property cycle. JR Prosperity Partners are experts at reading the property market and can help you find an opportunity in any economic climate. Contact us today on 1300 522 562.
