It’s an important question that renters are asking themselves daily. When will the cost of rent slow down OR when will it become easier to find a place to call home!
Well Michael Yardley recently summarised the answer to this question perfectly!
Long story short – not for quite a while. In fact, it may get worse before it gets better.
There are about 7 million renters in Australia and simply put there aren’t enough properties available for them. The recent property boom saw investors sell up trying to take advantage of prices and a large proportion sold to owner occupiers causing an issue to the supply.
Combined with the fact that interests rates are rather high for the average person, the every day mum and dad investor simply can’t borrow the money to invest in property like they used to. In turn, this is affecting the rental supply (no new properties coming into the rental market).
The ever-constant changing tenancy laws that favour tenants also make prospective investors wary to go down the path of becoming a landlord particularly as the cost to own an investment property are constantly rising to meet legislation requirements.
The rising costs of building a new property also is making investors hesitate and delay investing – delays in materials, risk of builders going under and similar.
And finally, there has been a HUGE increase in migration! Effectively A LOT of people are looking for a place to live.
At the end of the day – none of these challenges are going to be resolved any time soon and given that its getting harder and harder for people to get into their first property – the need to rental properties isn’t going to ease up in the near future.
What does this mean? Well in Michael’s words….
“A window of opportunity for investors with a long-term focus right now.
Pent-up demand will be released as greed (FOMO) overtakes fear (FOBE – Fear of buying early), as it always does as the property cycle moves on.
We saw an opportunity like this in late 2018-early 2019 when fear of the upcoming Federal election stopped buyers from entering the market.
And look at what’s happened to property prices since then.
I saw similar opportunities at the end of the Global Financial Crisis and in 2002 after the tech wreck.
History has a way of repeating itself.
Strategic investors will take advantage of the opportunities our property markets will offer over the next couple of years maximising their upsides while protecting their downsides.
Now I’m not suggesting taking advantage of tenants, what I’m suggesting is to recognise there is currently a problem (lack of rental accommodation) and provide a solution.
Note: While the current property market might not be attractive for investors right now due to high costs, government interventions and low supply of property for sale, it’s important to remember that property investment is a long-term game.
Don’t try to time the market – this is just too difficult.
And don’t hunt down a bargain.
All investors should focus all their efforts on buying an investment-grade property in an A-grade location.
These types of properties are in short supply but are still selling for reasonably good prices.
Plus they’ll hold their value far better in the long term.
While it might feel counter-intuitive to buy in a correcting market, you can also benefit from less competition, low consumer sentiment, having more time and minimal risk of oversupply.”
I would love to hear your thoughts about this! Feel free to leave a comment below and of course if you want to discuss this more for your personal circumstances then reach out!
Here at Smarter Property Investing we work with every day investors like you and can help you:
- calculate your cashflow
- help you understand what size portfolio they need to meet their income goals
- source properties that have high potential for capital growth for you to leverage
- review any properties that you have sourced direct on the suitability for your needs and goals
- connect you with our team of insurance brokers and depreciation specialists
- answer any question about investing in property!
- existing portfolio reviews and helping you identify any possible red flags.