So you’ve all seen the news. Heard the headlines. Property is going up. Property is going way up. Property is going down. Property going to crash! Time to make money. Time to be cautious.
Every day there’s a different headline or guru spouting what you should do when it comes to buying property.
It’s not surprising young potential property buyers are confused. There are so many mixed messages and conflicting opinions it’s hard to know who to listen to.
Since 2018 property values in most places around Australia have dropped. This is causing people to wonder if now might be a good time to grab a bargain, or if they might be walking into the crash some are predicting.
So how do you know what move is right?
The short answer is simple. You don’t.
I don’t care what anyone says, nobody can accurately and consistently predict what will happen in any investment market, including the property market.
I know this with absolute certainty, because every investment market around the globe is driven by investors (read: humans). We humans are unpredictable. We act on emotion, we’re not always rational, and we suffer from flaws in our psychology and decision making processes.
If anyone had cracked the code of investment markets, they’d likely be keeping the secret so they could make all the money investing in every ‘sure thing’ going around, while all us other suckers were running in circles trying to figure it out for ourselves.
But, all hope is not lost.
While I don’t know whether the property market is on the way down (or the way up) in the next year and beyond, I can answer the question of whether now is a good time for you to buy property.
Are you ready...?
The answer is… (...drumroll for dramatic effect…)
… It depends!
Apologies, as I know this probably wasn’t the answer you were looking for. But, let me tell you what it depends on, and then I’ll share with you a strategy I know WILL work to make you money over time with property.
Whether a property purchase will be good for you really depends on you. It depends on where you’re at now, what’s important to you, and how your situation is likely to change over time.
But ultimately, what it boils down to is whether you can comfortably hold the property you’re thinking about buying through the property cycle, which allows you to hold the property until the whole property market increases in value.
Worth noting here that I’m assuming you choose a good property. That means in an area where people want to live, where demand is expected to increase over time, and ideally where a supply of properties is limited (read most capital city CBDs and surrounding suburbs).
A Smart Property Strategy
Ok so here comes the crunch. There is a smart way to buy property that gives you the best chance of making good money over time. This strategy is one of the least ‘sexy’ property investment strategies going around, but one of the most effective.
But first some statistics.
The median house price in Sydney is expected to increase from $1.1m today to over $7.9m in the next 30 years. Yep, you read that right. Almost $8m for your slice of the Australian property dream.
This is based on the most recent house price report from Domain (September 2018), showing the Sydney median house price at just over $1.1m, and the Core Logic 25 year property housing trend report showing average house growth at 6.8%. You should also think about inflation, where $7.9m in 30 years more than likely won’t be worth as much as today.
But, you can see that even if property prices don’t grow at the same pace they have in the past, there’s still plenty of wiggle room to get a ‘worse’ result and still make a bunch of cash.
To me, these figures tell me that if you’re in the property market for the long term (with a good property) you’re probably set to make good money.
Sure, there are loads of other property buying strategies out there. Buy, reno and flip. Chasing the property hotspots. Using equity to buy a bunch of properties fast and retire in your 40’s. There are too many to mention.
I’m not saying these don’t work. Definitely, there are people who have made money from doing this, and some of them have made loads.
But what I am saying is that these strategies involve more risk than just buying and holding a good property for the long term.
With these ‘sexier’ property strategies you need a bunch of different variables to line up just right. You need the property cycle, borrowing conditions, interest rates, property selection, funding, cash flow of the purchase, not to mention a bunch of other variables to be right for you to get a good result from your property investment.
When you buy property for the long term, you only need to get one thing right. You need to make sure you can afford to fund your property investment while you live the lifestyle you want.
If you can do this, and you buy a good property, you’ll be set to get the best results over time. You’ll do it with less risk. You’ll do it with less stress. And you’ll do it knowing with full confidence in your strategy.
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Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.
Image credit: Santi Nunez