As the property market shows signs of steady improvement many people are wondering if now is the right time to invest.
John Edwards, founder of Residex, says: “There’s never a wrong time to buy residential property, as long as you’re buying it with the intention of holding it for a considerable period of time.
“While capital growth rates in the future aren’t likely to be at the same level that we’ve seen in our living memories, what is going to happen is there will be a substantial increase in rental obligations as we move forward.”
Edwards foresees the housing market heading towards what we saw in the first half of the 1900s, where rental yields were up into the teens, peaking at around 22 per cent on Sydney rental properties.
“So unless young people get into the market now and get themselves set, while housing values may seem expensive, they are going to ultimately end up with a much higher commitment by way of rent,” he says. “While interest rates are low it’s a good opportunity to start and get your equity repaid as soon as you can.”
Margaret Lomas, founder and director of Destiny Financial Solutions, agrees.
“Every year is a good year to invest in property and 2013 will be an exceptional one,” she says. “Over the past three years, strong property investments which display solid growth drivers have remained stable and in many cases their yields have grown, making holding them through this period of stability worthwhile.
“Now, these properties are ready for another growth spurt, and savvy investors will be sure to secure such property early in 2013 – wait too long and you will definitely pay more than you could have.”
An RP Data survey of housing market sentiment from March shows Australians are becoming more confident that dwelling values and rental rates will increase in 2013. More than half (51 per cent) of those surveyed predicted that values will rise over the coming 12 months, compared to 43 per cent in October 2012. And 80 per cent or respondents agreed that now was a good time to buy property (up 4 per cent from October 2012).
RP Data national research director Tim Lawless says: “As consumer confidence in housing market conditions rises, we are likely to see a larger number of dwelling sales as the year progresses. Transaction data from last year was already showing an improvement in home sales, with 7.6 per cent more homes transacted over the second half of 2012, compared with the first half. If the survey responses are anything to go by, we should see a continuation of this trend through 2013.”
For those sitting on the fence and unsure of whether to take the plunge, Lomas has some advice to first-timers: “I’ve noticed that first time investors seem to be waiting around until that perfect property falls into their lap. This is never going to happen and no one ever buys the perfect property. Always remember, even a fair to middling property investment is better than no property at all.”
Edwards advises those who want to get into the property market to look for older style properties that they can renovate and put a bit of “personal exertion” towards.
“Then you will achieve reasonable levels of capital growth or improvements in capital values, even though the market doesn’t drive forward strongly,” he says.