The Sydney and Melbourne markets are currently in a state of decline. Property values are decreasing and market sentiment is weakening. The property market will continue to decline until growth in property value has stopped and market activity has slowed down.
Property cycles in Australia fluctuate across a 7-10 year period, through 4 stages – Boom, Decline, Slump and Recovery. This means the market will eventually recover and property will once again become favourable for investment. But right now, it would appear that it is not a good time to invest in property.
The property cycle is by no means set in stone and it is not a reliable predictor of future property performance. The majority of investors will see the current market decline as an opportunity to invest in other locations or investment classes. However, there are many reasons why now is the best time to invest in the Sydney property market.
Availability of Finance
Interest rates are the lowest they has been in over 20 years. The Reserve Bank of Australia has announced it will keep the official cash rate at 1.50 – the same it has been since 2016. Regardless of these low rates, credit conditions have tightened for some borrowers. But, for those with high credit quality, this is a great time for lending.
When the property market is experiencing slow growth, mortgage demand will decrease and the banks will fall over themselves to find borrowers. They will offer low rates and flexible lending terms. Investors can choose from a large number of competing lenders for both new loans and refinancing.
Population and Demographics
Sydney is a thriving capital city. One thing that always stays true about capital cities, is they provide jobs and attract droves of people from every demographic. The population of Sydney will continue to increase regardless of the state of the property market, particularly if rents stop growing.
Low unemployment and high housing demand will keep Sydney prices stable, following the initial decline in property values during the market downturn. Property which has experienced the most growth in the previous boom cycle, is typically at the most risk of value decline. Whilst some property will not experience much decline at all, if any. Good market research will show where these buying opportunities are located.
Warren Buffet has a famous quote: “Be fearful when others are greedy, and greedy when others are fearful”. Nothing can be more true of the property market. When the market is in a state of decline, people become fearful and decide not to purchase property. This decrease in demand has a negative effect on property values, which makes property more affordable to purchase.
Market sentiment refers to the general opinion of the masses. People tend to flock together when it comes to the property market. In boom times, people jump on the bandwagon for fear of missing out. In market decline, people fear loss and collectively sell or stop investing. Don’t be the masses. Get independent advice to take advantage of opportunities that fearful people cannot see.
At JR Prosperity Partners, we specialise in residential property investments and pride ourselves on providing our clients with successful property investments. We have made successful property purchases in all phases of the property cycle – and we can do the same for you. Contact us today on 1300 522 562 if you would like to learn more.