February 2008 |
I was getting my little boy ready for his first day at school the other morning, and had the early news on TV. The number one story was the prediction of doom and gloom for property owners this year after yet another interest rate rise. The reporter went on to say that the latest rate increase was the eleventh since 2002. On the average home loan of $ 300,000 this has added an extra $ 536 per month to those mortgage repayments in just 6 years. No wonder the media are having a field day! Amazing isn’t it how everyone becomes an expert once interest rates hit a 10 year high, or the share market takes a dive. Are you listening to all the predictions of a slump in the property market? For the average person, the current media hype will tend to make them think that property prices will fall. Personally I feel this offers opportunity for astute investors. As an active property investor for 11 years, I have been in the constant property cycle and know that we are about to experience an interesting period in property investing. I’ll tell you why....... It will now become much harder for families to afford to buy their own home. This is not so much a direct result of the interest rate increase and the immediate effect that has on a home loan, but more the fact that the average person struggles to save the initial deposit needed for a property purchase. So what are their options? They have to rent. This means that rental demand will increase. If you are already an investor this is great news for you. Rental vacancy rates for the last year or so have been extremely low - indicating an already high demand. But the other thing to consider is that we have been experiencing a shortage of available housing as our population grows, particularly in well established areas. I’ll let you in on a little tip here. We know that credit has been a big concern lately with the sub prime issue in the U.S? On our own soil this has created a shortage of wholesale money available to the big lenders, and in turn has made the major property developers very cautious. Fewer developers are willing to take a risk these days, so this most like result in a downturn in new building projects. All this contributes to a reduction in the supply of houses. So what happens when rental demand is high and there is a lack of supply in available housing? The cost of rent will sky rocket! Not such good news for people starting out, but great news for investors. This process has already started! I just had tenants move into one of my properties in the last week. People were queuing for an inspection. 7 families applied for the lease and they even wanted to bid on the rent. One lady voluntarily offered to pay an extra $20 per week, just because she was tired of looking for a place to rent. She explained how hard it had been to find a place to rent and it had taken her quite a few months to find something that she liked! So as more and more people are forced to rent, the rents will continue to increase. Eventually it will be more viable for people to pay the same on a home loan as they would to rent, so why wouldn’t they just buy? They would IF they had a deposit, wouldn’t they? Most don’t, so they continue to rent. Rental yields will become higher and in turn so will capital growth. Pretty soon we will be in a property boom. And who’ll be driving it? The educated investor. Now, you might say “ that’s all well and good for you and other investors, but what about the everyday people like me who have never done this before?” Truthfully, you are in THE best position. You have the chance to learn how to invest in property the right way first time around. Realistically, if you are already an owner occupier, then chances are you are sitting on a fair bit of equity, or capital growth that is current unused. You have this equity because you have already been in the property cycle in your own home, so you have done this before. Here’s your chance to educate yourself, invest and get into the property cycle at the RIGHT time. Be warned however, a property boom does not mean ALL properties will increase massively in value. There are several things you need to look for to guarantee capital growth. I could tell you where and what you should look for, but what would you do second time around? And if you follow my strategy for property investing, there will be a second purchase, a third, and perhaps even a fourth…… If you would like to learn how to invest for yourself, or you'd like information on the best way to invest in property click here. To your success, Jule Corporation Pty Ltd Subscribe |
