We get asked this question nearly every day – is it the right time to buy? Particularly because the news of late, has been dire – but is that what’s really happening in the market? Do high interest rates mean wait? And what does a housing shortfall mean? Let’s take a look:
Interest Rates at a 10-Year All-Time High and Now Stabilising
One of the key factors that impact both the ability to buy an investment property and make money from it is interest rates. According to recent reports, interest rates are currently at a 10-year all-time high but are now at a resting point. At first glance, these could be a negative, however, this plateau offers breathing room for investors to make informed decisions without the stress of rapidly rising rates.
Experts predict that interest rates will likely drop in the next 12 to 24 months. A decline in interest rates often fuels a new surge in buyer demand, thus driving property prices even higher. So, if you invest now, you’ll not only benefit from the stability but also stand to gain from the expected price increases triggered by future rate drops.
Past Trends as a Guiding Light
Hindsight is 20/20, and when it comes to property investment, there’s much to learn from history. If you could go back 10, 20, or even 30 years, would you really care what the news was saying or where the market was at that moment? Probably not.
For instance, housing shortfalls have been a consistent theme across different decades, especially in high-demand areas. This has led to a long-term increase in property values, benefiting those who invested early. Irrespective of the market conditions at the time of purchase, a well-located property would have appreciated over the years. Right now, there is a huge shortfall of properties. Mark Bouris was on the Today show recently outlining the shortfall in dwellings being built versus housing demand and that this trend will continue through to 2041!
Time in the Market vs. Timing the Market
The adage, “It’s not about timing the market, but time in the market,” holds true for property investments. While catching the market at its lowest ebb could yield significant benefits, waiting for that perfect moment may mean missing out on good opportunities that come by now. Investment success often comes from holding a property for an extended period, allowing it to appreciate and generate rental income, rather than quick buying and selling to make a fast buck.
The recent low growth in Australian construction costs, as noted by CoreLogic, indicates that the property market is not experiencing a volatile uptick in prices due to increased building expenses. This could be a signal for investors that now is a viable time to enter the market, before demand surges and prices climb accordingly.
Time to make your move?
All of this — borrowing money at a stable rate, not enough new properties being built to keep up with demand and relatively low construction costs — means that now might be a really good time to buy a property for your future. The long-term nature of real estate investments often shield you from the immediate impacts of market volatility. Rather than agonising over the ‘perfect timing,’ consider focusing on the quality and longevity of your investment. Now might just be a good time to go for it!
